Helping grown children financially doesn’t have to hinder their path to independence

The conventional advice for parents is to cut off the financial relationship with their young adult children as soon as possible.

We are told that we have to crowd them out to support themselves financially or risk raising irresponsible adults – living lazily in their nursery or the basement – who are unable to handle their money.

But that advice is outdated amid the reality of an economy still struggling with the effects of the pandemic. Helping grown children doesn’t have to hinder their path to independence.

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Our children now face monthly rent payments that can exceed 50 percent of their net wages. Food prices are rising due to inflation. Energy costs have risen. When your kids need to buy a new or used car, they face exorbitant prices.

I’ve long advocated that parents encourage young adults to live at home for as long as possible, especially if they have a huge student debt to pay off. Even if they don’t have any debt, being rent-free for a few years can help them immensely when they finally get started. So all three of my kids in their twenties who have researched the cost of renting in the DC area are happily living at home.

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

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

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The ACA requires plans that provide coverage for dependent children to make coverage available until a child is 26. Coverage is mandatory even if they are married or have children. In general, they can stay on the plan even if they don’t live at home. They also don’t have to be claimed as taxable to maintain coverage.

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

Even when employees have coverage, the combined cost of premiums, deductibles, and other out-of-pocket expenses can be significant.

According to the Kaiser Family Foundation’s 2021 Employer Health Benefits Survey, annual premiums for employer-sponsored family health insurance were $22,221 for families and $7,739 for single coverage.

Most insured employees contribute to the cost of their coverage. On average, employees contribute 17 percent of the premium for single-person coverage and 28 percent for family coverage. The average annual amount contributed by covered employees was $1,299 for single coverage and $5,969 for family coverage.

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The financial burden of the deductible is steadily increasing. Last year, 85 percent of covered workers had a deductible in their plan, up from 74 percent a decade earlier, the KFF report said.

The smaller the company, the greater the deductible. Employees at companies with fewer than 200 employees on average face a deductible that is 70 percent higher than those of 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 employees face relatively high contributions to enroll in coverage,” according to a separate Health System Tracker report from the Peterson Center on Healthcare and KFF. “People with employer coverage often face a deductible, which may require the enrollee to spend thousands of dollars before the plan covers most services.”

Workers in lower-income families with employer coverage spend a higher proportion of their income on health care than those with higher incomes, the report found.

There are many challenges for 26-year-olds who fall off the cliff of parental insurance

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

This may not be feasible if you are looking forward to getting rid of dependent care coverage because you need to save money. It could also be that your child has moved to an area where there is no point in staying on your plan if they need to see medical professionals outside of your coverage network.

If you are having a hard time, your child can share the costs, help with deductibles or co-payments. It doesn’t have to be an all-or-nothing deal.

Soon they will grow older and stand on their own. But if there are years between you and paying all their health care costs, it can make all the difference that they accumulate a significant amount of money in an emergency fund and retirement account.

Starting a full-time job of an adult child so that they can stay on your health plan gives them space to take a breather financially.

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