How do I stop a career break ruining my finances?

There’s no silver bullet to solve the gender investment gap. But one area has a lot to answer for: career breaks.

Our research* shows what we’d all expect: that more women take career breaks than men. Despite some changes in societal attitudes and some small steps to equalise maternity and paternity leave, women still take the bulk of the time out of their career when a couple decides to start a family.

If we dig into the figures, the top line doesn’t look so bad. Our data shows 32% of women take a career break, compared to 24% of men – a chunky difference, but not colossal. But then we delve into the data a bit further. Generally, men take career breaks to go travelling, to study or to recover from ill health, meaning their career gaps are shorter generally.

When we look at the split for career breaks specifically for starting a family, we see that 56% of women who’ve taken a career break have done so to have children. For men it’s 25%. Clearly we’d hope this pendulum swings a bit in the future, but for now women still bear the bulk of the responsibility for taking a break from their job to have kids.

And what truly makes a difference is that women tend to be off for longer. While two-fifths of men took a career break of two years or less (including many who were off for less than a year), almost half of women took a break for five years or more.

But here is the most crucial element – the impact that career gaps have on each sex’s money and financial prospects. For men, almost half said that time out from their career was actually very positive or positive, presumably because they were able to study, or learn some other new skills that benefitted them in their work life.

In contrast, 41% of women said their break had a negative financial impact. What’s more, 16% are still trying to work out what it means for their money – either because they haven’t had time to take stock, or they’re still off work and so don’t know what potential hit they may take yet.

Now, we don’t just want to outline the problem. What’s the solution? Clearly, it isn't feasible for women to simply stop having career breaks. Many women want to take time off when they have a family to be at home with their children – and if we all stopped having kids society would be in trouble.

So, what can we actually do?

1. Have a financial plan

When you get pregnant, it’s understandable to focus on everything to do with the baby. But don’t forget to plan the financial side of starting a family too. As a starter, you need to find out what your maternity pay will be, how long it’ll last and whether you can afford to live on it. For most people, being off work will cost them – in lost salary and/or bonuses. And then you need to think about how you’ll split that burden with your partner. Which brings us neatly on to…

2. Start discussions with your partner early

Talking about how you’re going to split the finances with your partner isn’t a discussion you want to save for the delivery ward. It can be uncomfortable talking about money (although it’s a breeze compared to childbirth), so make sure you start the discussion early – ideally before you even get pregnant. Make clear what the financial cost is going to be and work out how you’ll split it. I’ve known women who saved before they got pregnant to cover their share of the mortgage while on maternity leave, while their partner had cash to spare. Don’t be that person.

The discussions should cover basics like how you’ll pay for the endless nappies and baby paraphernalia, but also bigger things like how you’ll manage the impact on your pension or any savings you might have. If you saved regularly before you went off, and your partner will have spare cash while you’re off, should he add to your savings? The same goes with your pension. There’s not really a right answer, but discuss it so everyone is clear.

3. Think about your return

When you get pregnant, probably the last thing you’ll be thinking of will be your return to work. But it’s good to have an idea in mind of whether you think you’ll return to the same job, and whether you’ll see your income drop (as a result of going back part-time, for example). If you return to work three days a week, that’s a 40% reduction in your salary you need to factor in. If you think that’ll be the case, then plan for it now (with your partner too).

Likewise, if you know you’re not likely to return to work, how will that impact you? You need to think about the impact on your ability to pay bills, save money, and save into your pension. Equally, if you’re returning full time and don’t have family help, you need to consider how much childcare will cost and how you’re splitting that with your partner. Anecdotally, it seems like many women end up taking on the burden of childcare costs, but you both made the baby so you should both pay for its care.

*All the information in this article is from an independent survey of 5,000 UK adults carried out for AJ Bell by Opinium between 26 and 30 August 2021.