Raising the age for how long young people can stay in foster care will be "life-saving" for some of NSW's most vulnerable individuals, advocates say.
The state government will extend financial assistance to carers or people in care until the age of 21, bringing the system into line with all other states and territories.
State funding for a child to live in a foster home in NSW currently ends at 18.
Families and Communities Minister Natasha Maclaren-Jones announced the change would take effect in February under a $100 million investment over the next five years.
It means young people will be supported for three more years if they decide to leave home, or their carers will continue to be paid an allowance if they stay.
"Our investment is focused on creating stability so young people can work towards independence and achieve their goals," Ms Maclaren-Jones said.
Premier Dominic Perrottet said foster parents were doing an "incredible" job caring for children who were often vulnerable, and the financial support is "needed".
Paul McDonald, chair of advocate group Home Stretch, said some out-of-home care leavers struggled to adjust to independent living.
Mr McDonald said 1,200 teenagers left care each year in NSW, and data showed many became a parent, were imprisoned or homeless within the first 12 months.
Raising the age of care from 18 was "life-changing, and life-saving", he said.
"We know we'll halve the homeless rates, we know we'll double the education, employment rates for this group," Mr McDonald said.
Joseph McDowall, from Create Foundation, said many young people felt they needed more time to plan their lives after care.
"We've spoken to many children over the years. What they've always told us when it comes to transition is 'slow things down'," he said.
"We know lots of people don't have a leaving plan … this extra little time is like a buffer period to allow young people to get that information and knowledge."
The Opposition called the change a "common sense" initiative.
"We're glad New South Wales is following the other states in relation to upping the age and it's an important change," leader Chris Minns said.
"I'm not going to criticise them for making a good choice. The way we operate is when the government, even if it is delayed, listens to common sense, listens to experts and implements those changes in New South Wales, that's a good thing."
