And unlike moms and dads-to-be overseas, expectant parents in the U.S. can’t rely on their bank balances being topped up while they’re settling their little one in.

While just 21% of parents in the U.S. have access to paid parental leave, it’s a legal requirement abroad.

In Sweden, parents are entitled to 480 days of paid parental leave for the birth or adoption of a child—which can be split evenly between parents if there are two—in New Zealand it’s six months, while in Canada leave can go up to 69 weeks when shared between a couple.

Then come the years of childcare, pre-school and high school—with economic thinktank the Brookings Institution estimating the average middle-income American family with two children will spend $310,605 to raise a child born in 2015 up to age 17.

Then of course, the college bill drops. 

It’s no wonder that grandparents often work towards the financial milestone of their grandchildren heading to college—after all, it costs an average of $40,000 a year to study privately.

But what about those early years, which can’t be covered by a 529 college savings plan?

Increasingly parents are trying to foot the bill for their children to give birth themselves, piecing together the support from financial services which are wildly outdated.

‘My daughter is only 2 but I’m planning for her parental leave’

New York-based Liang Zhao is the CEO of public relations company Vansary and has seen for herself how difficult it can be for working moms to juggle their commitments.

The eldest of three and born in China, Zhao was looked after by her grandparents from four weeks old while her mother returned to work as a doctor. When her siblings were born in the U.S. almost a decade later, Zhao’s mother again returned to work within a month—with Zhao’s grandmother relocating from China for seven years in order to help look after the babies.

In 2021, Zhao became a mother to daughter Olivia, and said trying to raise a family, sustain a successful business and build their family’s finances has been “really difficult.”

So Zhao has extended the scope of her financial planning, not only through her own maternity years but even through to her daughter Olivia’s—having learned firsthand how tough it can be.

The planning may sound extreme, and Zhao says of course there is “no pressure” on her now two-year-old daughter even to have children, but she explained: “I know it sounds ridiculous to be planning for parental leave [of my child] at such a young age, but if we take a step back and look at the life of a woman overall in the U.S. and the financial requirements overall, there’s not been enough conversation or progress in the topic of maternity leave.”

Parental leave is a huge milestone, Zhao notes: “They are formative years that will 100% affect [Olivia’s] earnings potential during that time and potentially for the years that come afterwards.”

The evidence backs up Zhao’s thinking. According to a 2019 study titled Child Penalties across Countries, women’s earnings in the U.S. drop by approximately 40% following the birth of their first child—and stay at that level. Conversely, men’s salaries remain the same.

Numerous studies have also found the gender pay gap—which sees women currently earning around 82 cents for every dollar a man makes—is largely attributable to the ‘motherhood penalty.’ Approximately 80% of the gap occurs when a woman gives birth, a figure that’s unlikely to change as the gap has barely closed over the past two decades.

“Planning at an early age is so crucial and could be a huge game changer for so many women,” Zhao, who is in the process of buying a property in New York to build passive income for her family, continued. “My husband and I are planning income streams for having time and flexibility—we plan to be very involved with our grandchildren and want to take that into account with our financial planning.

“I never want [Olivia] to have to choose between having a career or a family, so she needs that foundation. If she doesn’t want to have children she will have extra money to do whatever she wants.”

‘Why do we educate women if we won’t support them to stay in the workplace?’

College fees are a massive burden around many students’ necks, and—monetarily speaking at least—women on average get a worse deal: they tend to dominate lower-income earning courses, and if they do make it into the higher-earning potential majors, their lifetime salaries still sit below their male counterparts.

However, although there are rafts of savings options and government support structures for college hopefuls, there are far fewer to help bridge financial gaps for new parents.

Ultimately, some experts believe rebalancing of priorities is needed to ensure that talented, educated and valuable members of the workforce don’t drop out when they have a child.

Eliana Sydes is Head of Financial Life Strategy at U.K.-based investment portfolio site Y TREE, and has been saving for her daughter’s potential maternity leave since the birth of her first child.

She described a lack of adequate support for new mothers as a “missing next step,” explaining: “The basic thing I come back to is why do we educate women if we won’t support them to stay in the workplace? If paying for college is so important that you set it up for your grandsons and your granddaughters, why would you not also facilitate that same granddaughter remaining in the work environment?”

Sydes recalled her own maternity experience: juggling a new son and demands at home, as well as a “paranoia” she was going to be penalized at work for having a child.

“When I had my daughter, two years later I just thought: ‘I don’t want her to ever go through this level of pressure, and feel like you cannot have the time to have the choice to enjoy your child,” she continued.

“I want to know if [my daughter] does make that decision, she doesn’t have to be stressed and worry about what impact this will have on her career: the things she’s worked for all those years, to use her brain, and to develop a career—that she doesn’t feel she has to make a compromise.”

Like Zhao’s, Sydes’s daughter—now 20—feels no pressure to have children. But she knows there is financial help if she needs it, as well as access to savings accounts and pension pots which Sydes has set up for both of her children.

“What happens around the stage of childbirth and that first period of time with your baby has such an impact on the rest of your life and financial working life. It’s really that key point where women change from being economically equal to men, to not,” she added. “If you can solve or help with that point, you’re more likely to set someone up to be good later on.”

Talking about the reality of returning to work—or not—is also key within families from a young age, she added: “Saving for a future isn’t just about saving cash because that’s disempowering, it’s also having the conversations to empower sons and daughters about the reality of having a child.”

Secure your own finances first

According to one JPMorgan wealth manager, conversations about financial planning for grandchildren can be among the most “feel good” ones to have with clients.

Joanne Johnson, senior wealth advisor at the company’s private bank said: “Let’s face it, parents love their children. But they adore their grandchildren.”

Johnson said her clients are thinking realistically about the economy in 2023, challenged particularly by inflation, and so instead of holding onto cash until their relatives reach set ages are stepping in to assist with the purchase of a home or “bridging income shortfalls” for new parents.

Yet no matter the good intentions, Johnson said it is “imperative that the grandparents have a complete understanding of their own lifestyle expenses, medical expenses, elder care requirements and the goals they might have for entertainment, travel, second homes.”

Next is a series of tasks: identifying income streams, stress testing investment portfolios and retirement funds, and forecasting how much will be needed for the rest of their own lives.

“Only after engaging in this exercise can a grandparent consider the amount, frequency and structure of gifts to grandchildren,” Johnson explained.

Then it’s a question of distribution—when should the funds be paid out, should it go to your grandchildren directly, should it go to their parents, is it for a specific role or purpose?

For larger amounts or assets, Johnson encourages the use of a trust: “That trust could continue for the benefit of future generations in perpetuity if that fits within family values and intent for wealth.”