Supporting adult children financially doesn’t have to get in the way of independence

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

We are told to either kick them out and support themselves financially or risk raising irresponsible adults.

But that advice is outdated in the reality that the economy is still suffering from the effects of the pandemic. Helping an adult child need not get in the way of independence.

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Our children are now facing monthly rent payments that can exceed 50% of their take-home pay. Inflation is causing food prices to soar. Energy costs are rising. If your descendants need to buy a new or used car, they will face exorbitant prices.

I have long advocated that parents encourage young adults to live at home for as long as possible, especially when they have to pay off a huge amount of student loan debt. That it’s free is really helpful when it finally launches. .

It is already common and accepted for young people to stick with their family’s cell phone plans. There are other ways to help young adult children that can make a lasting impact. Get them health insurance. If your insurance can afford to continue to care for your children after they get their first full-time job, you may have several years of savings that you can use to pay off debt or increase your retirement income. You can give it to your child.

The Affordable Care Act, also known as Obamacare, allowed young people to continue their parents’ plans until they turned 26. .

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The ACA requires plans that provide dependent child coverage so that coverage is available until the child turns 26. Compensation is mandatory even if you are married or have children. In general, you can continue your plan even if you don’t live at home. You also don’t have to claim as a tax dependent to maintain coverage.

Sit down with your child and find out the cost of getting your own insurance through your employer.

Even if your employees have insurance, the combined costs of premiums, deductibles, and other out-of-pocket expenses can be substantial.

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

Most covered workers contribute to the cost of insurance. On average, a worker contributes his 17% of premiums for single insurance and 28% for family insurance. The average annual amount contributed by eligible workers was $1,299 for single insurance and $5,969 for family insurance.

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The economic burden of deductibles is steadily increasing. Last year, 85% of covered workers had deductibles on their plans, up from 74% a decade ago, according to a KFF report.

The smaller the company, the larger the deductible. According to the KFF, an employee at a company with fewer than 200 employees on average faces a 70% higher deductible than an employee at a company with more than 200 employees ($2,379 vs. $1,397). dollar).

According to another Health System Tracker report by the Peterson Center on Health Care and KFF, “While many employers pay a significant share of health insurance premiums, some ‚ÄúPeople with employer insurance often face deductibles. Plans cover most services. Registrants may have to spend thousands of dollars before we can cover it.”

Low-income workers with employer insurance spend more on health care than higher-income workers, the report found.

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The key word in my discussion is affordability. Staying on the parent’s plan may not be cheaper. In our case, as a couple we need a family plan, so the cost remains the same.

If you were looking forward to removing your dependent care coverage because you need to save money, this may not be feasible. In the event that you need assistance, you may have moved to an area where it doesn’t make sense to stay on your plan.

If you’re struggling, your child can share the costs and help with deductibles or copays.

Soon they will be old and independent. But if there’s a gap year between when you carry them and when they pay all their medical bills, they can amass a good deal of money in their emergency fund and retirement account.

By allowing them to stay on your health insurance when your adult children start full-time employment, you give them some financial breathing space.

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