Helping adult children financially doesn't have to get in the way of their path to independence.

Helping adult children financially doesn’t have to get in the way of their path to independence.

Conventional advice to parents is to break off the financial relationship with their young adult children as soon as they can.

We are told to push them to get by financially or risk raising irresponsible adults, living lazily in their childhood bedroom or basement, unable to manage their money.

But that advice is outdated amid the reality of an economy still struggling with the fallout from the pandemic. Helping adult children doesn’t have to get in the way of their path to independence.

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Our children now face monthly rent payments that can be more than 50 percent of their take-home pay. Inflation is causing food prices to rise. Energy costs have gone up. If your children 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 as much as possible, especially if they need to pay off massive student loan debt. Even if they don’t have debt, a few years of not paying rent can go a long way when they finally get off the ground. So my three sons in their twenties, after exploring the cost of renting in the DC area, live 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 he gets his first full-time job, it will give him several years of savings that could be used to pay down debt or increase retirement contributions.

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

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The ACA requires plans that offer coverage for dependent children to make the coverage available until the child turns 26. Coverage is mandatory even if they are married or have children. They can usually stay in the plan even if they don’t live at home. It is also not necessary to declare them as tax dependents to maintain coverage.

Sit down with your son and weigh the cost of getting his own coverage through his employer, because the financial case for continuing to support him through 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.

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 conducted by the Kaiser Family Foundation.

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

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The financial burden of deductibles has been steadily increasing. Last year, 85 percent of covered workers had a deductible on their plan, up from 74 percent a decade earlier, according to the KFF report.

The smaller the business, the higher the deductible. Workers at businesses with fewer than 200 employees on average face deductibles that are 70 percent higher than those at businesses 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 contributions to sign up for 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 can require the member to spend thousands of dollars before most services are covered by the plan.”

Workers from low-income families with employer coverage spend more of their income on health costs than those with higher incomes, the report found.

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The key word in my argument is affordability. It may not be cheaper to stay on the 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 possible if you want to get rid of dependent care coverage because you need to save money. It may also be the case that your child has moved to an area where it doesn’t make sense for them to stay on your plan if they have to see medical professionals outside of your coverage network.

If you’re struggling, your child could share the cost, helping with deductibles or copays. It doesn’t have to be an all or nothing deal.

Very soon, they will be old and alone. But having years of rest between you and paying all of your health care costs can make the difference in accumulating 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 stay on your health plan gives them room to catch their financial breath.

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