19 Jan Should my adult kids pay their own car insurance, cell phone?

Q. I pay for cell phones and car insurance for my three adult children. It’s getting expensive but they don’t earn very much. I know we can shop around but does it generally make more sense for the kids to have individual policies on their own instead of being on mine? I’m the technical owner of their cars.
— Mom

A. You are a generous parent.

Before we get to the car insurance question, let’s talk big picture.

You need a plan, said Jeanne Kane, a certified financial planner with OneDigital in Boonton.

She said to consider think about how long you plan to pay for their cell phone and insurance bills.

To answer that, be sure to first add up the monthly costs so you’re looking at the hard numbers. See how much less your bills would be if you removed them from your plans.

If you want to pay forever, that’s one thing. But if you want to get them to pay, you need to have a talk.

“Have a conversation with the kids and let them know your intentions. It can be expensive as a young adult to get established but do you want to be responsible forever?” Kane asked.

Rather than cutting them off all at once, you can wean them off the parental support, she said.

“The kids can start paying a portion of their bills today. Increase that amount monthly until they’ve covered the additional cost,” she said. “Set a timeframe of when they’ll get their own coverage.”

If you think you can afford to keep paying, that’s fine, but Kane said you should consider the opportunity cost of what you lose — money that could be put into savings or investments for you and your retirement.

“On an airplane, you’re instructed to put your oxygen mask first, before helping others,” Kane said. “Do the same with your money.”

All of that said, there are ways to reduce car insurance costs. As you said, shop around.

“You never know what your rates could be until you speak to other providers,” Kane said. “Underwriters and insurance providers have different sweet spots in how they evaluate you as a risk. The higher the risk, the higher the premium.”

Make sure you’re using a bundle strategy, too.

“Insurance providers can offer discounts if you get coverage for your home and auto insurance from them,” Kane said. “Bundling can also save you the hassle if something happens to your car while it’s at home.”

Then ask about discounts, including those for defensive driving classes, good student discounts, anti-theft device discounts and even discounts for being a member of certain organizations, she said.

Also take a look at your coverage and see if you’re paying for more than you need.

For example, if you have an older car and it’s not worth much, you may want to consider dropping collision and comprehensive coverage, she said.

Collision insurance covers you for damage to your car if you’re involved in a car accident, and comprehensive, or what Kane calls “bad luck” insurance, covers damage to your car caused by acts of nature — such as storm damage — vandalism, theft, fire and more.

“These cover damages to your car, not damages to others,” she said. “That’s liability insurance and you want to keep it.

Note that if you have a loan on the car or a lease, your lender may require you to keep one or both coverages, she said.

Another savings possibility is to change your deductible.

“I prefer to insure against big losses vs. small claims. If you have a lower deductible, there is a higher likelihood that you’ll file a claim,” she said. “The higher the deductible, the lower the premium.”

If your children are no longer living at home, make sure that the insurance company knows where the cars are housed to avoid any issues with claims processing, she said.

On lowering costs for your cell phone bill, once again, shop around.

See what different companies will offer for the same coverage you have now. Then price out both family plans and individual plans, and do that math.

“Compare how much it costs to have four or five lines versus the three adult children paying their own service,” Kane said. “It may be cheaper overall for you to have a family plan versus individual plans, but that doesn’t mean you need to foot the bill.”

So take a close and serious look to decide how long you want to support your kids.

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This story was originally published in January 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.