Motherhood can be extremely rewarding in many ways, but it can also have unintended consequences for mothers who want to work while raising a family. The “motherhood penalty” can have an impact on women who want to advance in their careers. Furthermore, it can have an impact on their ability to accumulate wealth and create a secure financial future. The motherhood penalty is unjust, but it is a reality for many women. Understanding how this penalty is applied to mothers and how it affects their career prospects is critical for women as they make financial plans.
The Motherhood Penalty in Action
The motherhood penalty, in general, assumes that mothers cannot maintain the same professional standing as their male colleagues or women who do not have children. This can manifest itself in the workplace in a variety of ways, the most stinging of which is how it affects a woman’s earning potential. According to sources, a national think tank, the average mother’s earning power decreases by 4% for each child she has. Men, on the other hand, exhibit the opposite behavior. Men’s earnings increase by 6% after becoming fathers. This inverse relationship suggests that employers may still view men and women in traditional roles, with women serving as caregivers and men serving as breadwinners.
Mothers’ earnings may also fall as a result of them taking time off from work to raise their children or downshifting to a part-time or lower-paying job to be more available to their family. According to the Pew Research Center, women spend 32 hours per week on childcare and housework, while men spend only 18 hours. The motherhood penalty also applies to women who return to work after a break to care for children. According to a study published in the American Sociological Review, stay-at-home mothers are half as likely as mothers who have been laid off from their previous job to land a job interview.
Other manifestations of the motherhood penalty exist. According to the 2021 Women in the Workforce study, one in every three working mothers considered leaving the workforce or reducing their responsibilities to care for children during the pandemic and the subsequent economic circumstances. When women become mothers, it can be even more difficult for them to advance. Employers may doubt a mother’s ability to meet the demands of her job. As a result, they don’t provide opportunities for advancement, and as a result, many mothers’ careers plateau.
Reducing the Impact of the Motherhood Penalty
The motherhood penalty will not be abolished overnight. Despite advancements in gender equality at work, many women will continue to bear the consequences. Those who are thinking about becoming mothers should have a solid financial plan in place. Your retirement outlook should be the focal point of that strategy. Earning less means you may have less money to save for your retirement. In that case, women must seize every opportunity to increase their savings. Saving enough in your employer’s 401(k) or a similar tax-advantaged plan to qualify for the full matching contribution is part of this. Adjusting your contributions by 1% annually is a good way to gradually increase your savings rate.
Each year, you can roll over your HSA balance and earn tax-free interest on the growing balance. If your employer provides a high-deductible health plan, a Health Savings Account is another tax-advantaged way to save. These accounts provide a three-pronged tax advantage: tax-deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses. For 2022, the annual contribution limits are $3,650 for singles and $7,300 for families. Many people are unaware that after the age of 65, they can withdraw HSA funds for any reason without penalty.
The withdrawal is only subject to regular income tax. In a pinch, an HSA can be used as a retirement savings supplement, which is beneficial for mothers who haven’t fully met their retirement goals. A spousal IRA may be another way to save for married mothers who are taking a break from work. A spousal IRA allows your spouse to make an IRA contribution on your behalf even if you don’t have a separate income. The contribution limits for 2021 and 2022 are the same as for traditional and Roth IRAs: $6,000 each.
Make the most of your career breaks
If you take time away from work to raise children, re-entering the workforce may be more difficult after a long break. As a result, it’s critical to make the most of your time at home. Stay current on industry trends and consider expanding your skill set during this time. Update your resume while addressing any knowledge gaps. Keep in touch with members of your network while also making new professional contacts. Most importantly, get crystal clear on your vision for returning to work. Setting goals for yourself professionally and as a mother can help you balance your time at work and at home. Despite the obstacles, many women are finding ways to do so.
Having a child is an impediment to getting a raise for 43% of adults without a college degree, while 32% of adults with a college degree say the same. When deciding whether or not to have a child, women are more likely than men to say work flexibility is important (74% vs 66%).
Parents are more likely than non-parents to have chosen a job with a flexible schedule that allows them to balance their personal responsibilities, to have spent less time at work to focus on friends or family, and to have ensured that they had the support of friends or family. Women are more likely than men to have chosen a job with a flexible schedule that allows them to manage their personal responsibilities (70% vs 61%) and to have enlisted the help of friends or family (73% vs 64%). When considering whether or not to have children, nearly three-quarters of Americans without children (74%) say having enough savings is an important factor, compared to 59% of parents.