When it comes to motherhood, there’s nothing hidden about the costs. Nappies, dummies, childcare and those expensive teenie tiny clothes that are just too damn cute to resist. And don’t get us started on the bags under our eyes from the lack of sleep. Yep! Just when they start sleeping through the night and you start getting some shuteye, they turn into teenagers and keep you awake waiting for them to come home all night. It’s definitely a labour of love. 

Turns out those costs aren’t as hidden as the super tax penalty which only impacts ‘at home carers’ and which has lifelong impacts. While we’re home caring for children, we’re paying a massive price in lost retirement savings. That’s right. Caring for kids means less time earning, and less money in superannuation. Essentially a super tax on stay at home mums!

Before we get to the nitty gritty on this, here are a couple of important disclaimers:

Disclaimer: We definitely don’t vibe with being binary, generalising, or excluding ‘non-traditional’ relationships and parenthood. But the ‘facts’ described in the current system come across that way. So a big ‘sorry’ as we share the info based on how they’re written for ‘stay at home’ mothers.

Most important disclaimer: Mums are the best! And hats off to ALL parents, mothers, fathers, non-binary parents, stay at home, or working at any capacity. We see you. And you are appreciated.

Here’s what you need to know

Typically new mothers take around six years out of the workforce to care for their children. And when they ‘choose’ to return, they are more likely to come back part time.

More often than not, by the time they return to work they’ve significantly lost pace with their peers who didn’t take time out. And given we know who does most of the childbearing and rearing (genetics has a big say in making this ‘women’s work’) this further enhances the impact of the gender pay gap. This disparity results in less average pay per hour, in addition to working less hours on average. The difference in earnings adds up to staggering $760,000(*1) less in earnings over the remainder of their working lives. What does that mean for a woman’s super? It translates the impact of around $280,000(*2) less in super by retirement. Add those together and it’s a whopping $1.04 million price tag on being a mother.

In case you missed it – the devastating cost of motherhood

$1.04 million = less lifetime earnings for a ‘stay at home mum’ than a ‘working woman’

$1.21 million = less lifetime earnings for a ‘stay at home mum’ than than the average father

And this is all before factoring in the gender pay gap. Then it gets downright depressing. (*3)

The majority of ‘stay at home’ mums have a working partner so the assumption is that the working partner can provide for the mother and household. This doesn’t always hold true and we’ll explore that subject another day. But even assuming they do provide for the day-to-day costs fairly, what about superannuation? Even though it is now legally possible to contribute to your partner’s super, this is not common. It’s rarely thought about, rarely shared and hardly ever fair.

It’s not a good look and most Aussies, regardless of gender or interest in parenting, would agree it’s not fair. The good news is there are simple things we can do to level the playing field.

Strategies to ditch the hidden super cost borne by mums (no pun intended)

There’s not a lot we can do about biology, and given the choice, regardless of gender, most people won’t choose to stop looking after their kids because of the financial impact. And yes, of course we should lobby the government to give super bonuses or super tax breaks to mothers, but Australia has already been talking about this topic for more than 10 years and there’s been no change. So, we’ve got to take matters into our own hands while we continue to fight for government changes that support mothers.

Enough with the problem, let’s get onto the good, juicy stuff. Solutions! Here are three strategies to close this super hidden cost not matter how far away (or close) those kids are today:

1 / Smart start to super savings

No matter your age, gender, sexual orientation, culture, education level, or life path you choose, the first simple step is to take control of your super today. Make sure you only have one fund (unless you have a really good reason to have more) and ensure your hard earned money is in a fund that is working hard for you. What does that mean?

Choose a low fee fund that shows consistent returns through investment cycles is where you need to be. Consolidating into a lower fee fund ten years before having children can wipe out the impact of taking six years out of the workforce. Not the loss of earnings or career trajectory impact, but at least the $280k average super penalty women currently pay. Ideally Australians should make this a priority when they first start work (parents – talk to your kids at this time), or at least before they turn 25 years old.

2 / Better than tequila at your 21st – early lump sum contribution

Let’s be clear, we know that tequila sounds way more fun than super. And it is – today. But long after the party hangover subsides, the impact of shifting some of the cash on the bar into super will make you feel really good. That’s because $5k contributed to your super five years before having your first child could close the hidden cost of taking time out of the workforce.

For the parents, grandparents, or even the more sensible and organised youth of today, making a simple investment of $5k into super instead of massive bday parties, overseas jaunts, weddings/gifts or slick wheels, is a smart ‘sacrifice’ which will pay strong dividends. Again, make sure you switch to a low cost, consistently high performing fund to ensure the $5k isn’t just chomped up by unnecessary super fees, giving it a chance to maximise the gorgeous power of compounding.

3 / Last minute investment – no, not a fancy pram

Didn’t factor in the hidden cost of having a bubba? Or perhaps life snuck up on you and family life arrived without too much consideration. It happens to the best of us! But all is not lost if you’re already in the family way. An investment of $15k today into your super while you’re not earning can also work to close this hidden cost.

How? Where on earth are you going to find a cool $15k? Fair question. Here are a few sweet and simple ideas … instead of lavish baby showers and fancy gadgets you’ll never use (trust us – been there, done that) get people to throw in some cash for your future. Have a conversation with your partner about making contributions into your super while you’re on parenting leave, and make sure the dollars you agree on take into account the impact on your earning trajectory too. It’s also a great time to make sure you’re both in a good fund. If you need help working out what’s a ‘good’ fund for you, we’re here to help. Click here to get your Free Super Savings Report from Super Fierce.

Don’t get mad, get even. Supercharge your super today

The hidden cost on a woman’s superannuation nest egg as a ‘stay at home mother’ is yet another gender bias inherent in financial services. Because super builds based on what you earn, particularly in the first 20 years of your working life, the impact of motherhood on super is a structural problem the government must fix. But that’s going to take time, and women don’t need to wait for help when there are things we can do today to close that gap.

In the meantime, we’ll continue to convince the government to even the playing field and reduce the hidden costs for women where we can and should. But we’re also here to help you to maximise your super savings today. It’s time to take control! You’ve got this. And we’ve got your back.

Assumptions
*1/  All in “today dollars”, meaning the figures have been reduced by inflation to reflect what they could spend today. The total earnings impact is actually $1.67m! The math: According to the ABS mothers typically have six years out of paid work altogether (a number mirrored in the US according to the Pew Research Center). At the average full-time income (AWOTE) of $78,000 (ABS) and allowing for average wage growth in line with historic average (ABS), that’s a cost of $649,000. KPMG then found that the average hourly wage lost on returning to work is 9%, which causes an additional lifetime drag of $682,000. And finally, when they come back to work, they work 5.2 hours per week less than women without dependent children. At the average hourly wage of $39.47 (ABS) that amounts to $10.663 per annum less earnings. This continues for 18 years (average dependent child duration), and so with average wage growth of 3.5%pa (ABS), this adds up to a massive $322,770 over their lives.
*2/ For super estimate, we assumed ASIC and ASFA’s balanced fund performance of 7.5%pa, today’s average fees of 1.17%pa, contributions as per legislation, contributions tax of 15%, and tax on performance at an average of 7% (ASIC and ASFA) and inflation of 1.7%pa.
*3/ We assume fathers, mothers and women that aren’t mothers all earn the same per hour before they have kids. 

ABS    /   Pew Research Center (US) 

General information only

Finance topics we discuss in our videos, on our website and in other marketing material is general in nature. It doesn’t take into account your personal circumstances, your financial situation or your specific needs. You should consider seeking independent legal, financial, taxation or other advice to check how this information relates to your unique circumstances.

Super Fierce Pty Ltd (ABN 22 632 423 575) is the holder of Australian Financial Services Licence (AFSL no. 534567).