Saturday, November 12, 2016

Millenials Who Stay on Their Parents' Cell Phone Plans

It's a kind of meme to criticize millenials' lack of independence, by citing as an example that they stay on their parents' cell phone plan years after entering the workforce. For the most part, the analysis behind this is wanting. There are 3 basic scenarios to consider, and the slacker label only applies to one of them.

First, if the adult child is paying nothing, then yes, that may be slacking. But the fact is, a family plan is a much better deal, on a per-person basis, than a single-subscriber plan. T-Mobile, for instance, has plans that give you decent data, unlimited minutes and text for $10 per additional line beyond 2. Imagine that a family of 4 has a $100 bill, where the first 2 lines cost $80, and the next 2 cost $10 each. If the child pays $10, then they aren't really free-riding. Their folks are break-even, and the child is getting a good discount--because a stand-alone plan would cost at least $30 for a single subscriber.

The third approach is where the child pays more than their incremental cost--they pay their apportioned cost. In the above example, that would be one-fourth of $100, or $25. Not as good a deal as $10, but still a savings. Of course there are shades of gray, where the child pays more than their incremental cost, but less than their apportioned cost--e.g., $20/month.

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