5 Financial Steps Parents Need To Take When A Child Turns 18

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5 Financial Steps Parents Need To Take When A Child Turns 18

5 Financial Steps Parents Need To Take When A Child Turns 18
When your child reaches the milestone age of 18 years, there are a number of financial responsibilities that you will need to help them take on. Let’s take a look.  

Turning 18 is a milestone not just for your kid but also for you as a parent when you teach to start letting go and prepare your child for their transition as an adult. Your child who was dependent on you for their financial, emotional and mental well-being will now have to teach to start taking responsibility for their own actions. Turning into an adult would mean they become eligible to vote, drive, carry out financial transactions and even acquire assets.

So what steps can you take to create this transition easier for your newly turned adult? Let’s take a look:

    PAN, Aadhaar and passport:

Once your child turns 18, they will become legally eligible to carry out financial transactions. As a parent, you can help by ensuring that they apply for a PAN (Permanent Account Number) card, Aadhaar card, passport and driver’s licence. Your young adult will need these documents at the time of opening a bank or demat account, investing in stocks or Mutual Funds and at the time of filing tax returns. If your child already has these documents in place but jointly with you, they will need to update these documents in their own name with their signature and photographies.


Children who have a joint account with their parents will need to either update their accounts as an individual account or open a fresh account. Usually, banks will ask for their KYC documents along with their age proof and in some cases, personal verification. Once your child completes these formalities, they will easily be able to conduct financial transactions independently, issue cheques, open Fixed or Recurring Deposits, conduct net and mobile banking transactions, transfer funds and have their own Debit and Credit Cards. If your child holds a Fixed or Recurring Deposit account or a PPF account with you, they will also have to convert these accounts into independent accounts.


If you’ve bought stocks in your child’s name, you’ll need to open a fresh demat account for your child and transfer their shares to it. Check with the Mutual Fund firm as well. Many Mutual Fund houses simply upgrade the existing demat account to an individual one for the child to start operating it. It may not be a good idea to let your child dabble in stocks independently at this stage. However, you can surely help them to start investing through Mutual Funds. If you’ve invested in Mutual Funds on their behalf, your child will need to get the KYC done and then the parents can file an application for the transformation of the minor account to that of an adult.


For taxation purposes, if the child has any income, their income will no longer be clubbed with their parents. If the child gets more than Rs. 2. 5 lakh per year, they will have to pay the taxes and file returns. If you’ve gifted your child any money, it will be tax-free but if the income earned on this amount is more than Rs. 2. 5 lakhs, then it will not be tax-free.


An 18-year-old is at a legally permissible age to to buy Life, Health, Vehicle and another insurance policies in their name but it might be too early for them to purchase one. Since 18-year-olds typically don’t have any income or liabilities, they wouldn’t have much use for a Life Insurance policy. In case of Health Insurance, if the child’s parents’ health cover doesn’t include them, it is a sound idea to consider buying a Health Insurance policy at an early age since the premium will be low at that stage.

Transitioning to adulthood may come with its own share of challenges but with the right kind of guidance and hand holding, you can easily help your young adult become a financially responsible one.
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