Helping adult children financially shouldn’t get in the way of their path to independence

The classic advice to parents is to sever the financial relationship with their young adult children as soon as they can.

We are told to push them to fend for themselves financially or risk raising irresponsible adults – living lazily in their nursery or basement – unable to manage their money.

But that advice is outdated in the reality of an economy still battling the fallout of the pandemic. Helping adult children should not get in the way of their path to independence.

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Our children now face monthly rents that can represent more than 50% of their net salary. Inflation drives up food prices. Energy costs are on the rise. If your offspring has to buy a new or used car, they have to face exorbitant prices.

I have long advocated that parents encourage young adults to live at home for as long as possible, especially if they have to pay off massive student debt. Even if they’re debt-free, a few years rent-free can go a long way when they finally get started. So my three kids in their twenties, having explored the cost of renting in the DC area, are living happily at home.

It is already common and acceptable for young adults to stay on the family cell phone plan. Here’s another way to help your young adult children that can have a lasting impact: Keep them on your health insurance plan. If you can afford to keep your child on your policy even after they get their first full-time job, it will give them several years of savings that could be used to pay off debt or increase their retirement contributions. .

With the passage of the Affordable Care Act, also known as Obamacare, young adults can stay on a parent’s plan until they turn 26. But you might not realize they can stay on the plan even if they work for a company that provides health coverage. .

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The ACA requires plans that offer coverage for dependent children to make coverage available until a child turns 26. Coverage is compulsory even if they are married or have children. Generally, they can stay on the plan even if they don’t live at home. They also do not need to be claimed as a dependent to maintain coverage.

Sit down with your child and consider the cost of getting their own coverage through their employer, because the financial case for continuing to wear it until age 26 is compelling if you can afford it.

Even when employees are covered, the combined cost of premiums, deductibles and other out-of-pocket expenses can be considerable.

Annual premiums for employer-sponsored family health insurance were $22,221 for families and $7,739 for individual coverage last year, according to the 2021 Employer Health Benefits Survey. Kaiser Family Foundation.

Most covered workers contribute to the cost of their coverage. On average, workers contribute 17% of the premium for individual coverage and 28% for family coverage. The average annual amount contributed by covered workers was $1,299 for single coverage and $5,969 for family coverage.

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The financial burden of franchises has continued to increase. Last year, 85% of covered workers had a deductible in their plan, up from 74% a decade earlier, according to the KFF report.

The smaller the business, the larger the deductible. Workers at companies with fewer than 200 employees on average face 70% higher deductibles than those at companies with at least 200 employees ($2,379 versus $1,397), KFF said.

“While many employers pay a significant portion of health insurance premiums, some workers face relatively high premiums to enroll in coverage,” according to a separate Health System Tracker report from the Peterson Center on Healthcare and the KFF. “People covered by the employer often face a deductible, which can require the member to spend thousands of dollars before the plan covers most services.”

Workers from low-income families with employer coverage spend a greater share of their income on healthcare costs than those with higher incomes, the report found.

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The key word in my argument is affordability. It might not be cheaper to stay on a parent’s plan. For us, the cost would not have changed since, as a couple, we still need a family plan.

This may not be feasible if you are eager to get rid of dependent care coverage because you need to save money. Your child may also have moved to an area where it doesn’t make sense for them to stay on your plan if they need to see healthcare professionals outside of your coverage network.

If you’re having trouble, your child might share expenses, help with deductibles or co-payments. It doesn’t have to be an all-or-nothing deal.

Soon they will grow old and be alone. But having years of gap between you wearing them and paying all their health care bills can make the difference in amassing a significant amount of money in an emergency fund and retirement account.

At the start of an adult child’s full-time employment, allowing them to continue to benefit from your health insurance plan gives them the opportunity to catch their financial breath.

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