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  • Mike Bristow

MONEY AND MINORS:WHAT TO THINK ABOUT WHEN YOUR CHILD REACHES AGE 18

Updated: Jan 26


Your child’s 18th birthday may be just as momentous a milestone for you as it is for him or her. Seemingly grown-up, at least in the eyes of the law, your child may or may not be ready to assume the financial responsibilities that come with adulthood. This checklist contains a number of basic points you might want to implement or discuss with your child before he or she turns 18.

DAY-TO-DAY FINANCES

  • Help your child open a checking account in their name but add your name to the account for ready access, if you need it.

  • Make sure your child obtains a debit card that is linked to the checking account for expenses and ATM use.

  • Talk to your child about the importance of establishing credit and compiling a solid credit history. Help them apply for a credit card in their name but make sure they understand that the card is to be used sparingly and must be paid off every month.

  • Agree on an amount that you will deposit in your child’s checking account each month. Make sure they understand this amount is the maximum that they expect to spend during that period.

  • Take a similar approach with their cellphone. Set targets by telling them not to use more then the talk, text and data limits in your contract.

BUDGETING AND SAVING

  • Help them create a simple budget. You already know how much money you’re going to place in their account each month. Now help them set realistic monthly spending targets. Setting up your free Tandem financial website might help you formalize the process, while putting all your accounts in one easy to view dashboard.

  • If your child is planning to work part-time while in college, arrange for direct deposit if possible, into their checking account.

  • Help your child establish a Roth IRA if they are working and earning income. At this point in their lives, children may not be able to afford to make the maximum ROTH IRA contribution up to $5,500 a year or the lesser of your child’s earned income.

LEGAL CONSIDERATIONS

  • If your child has a UTMA or UGMA account, it’s time to designate them as the outright account holder.

  • Review your life insurance policies for which you intend your child to be the beneficiary. When a child is under the age of 18, he or she can’t receive life insurance proceeds directly.

  • You must appoint a guardian and if you don’t, the court will appoint one. At the age of 18, however, children in most states are allowed to receive life insurance proceeds directly. Determine whether you wish to name your child as beneficiary or perhaps establish a trust for the benefit of the child/ if you feel that he or she is not yet capable of managing an inheritance.

  • Talk to your attorney about drafting a healthcare proxy that provides you with the right to receive medical information about your child and make medical decisions on his or her behalf.

  • Draft a Power of Attorney that enables you to intercede and make not only medical but financial and legal decisions on your child’s behalf.

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