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5 Financial Steps Parents Need to Take When A Child Turns 18
No matter how old the children become, they always remain the little ones for their parents. The responsibilities begin at the birth and even go on after the child turns 18. This particular age milestone is quite a crucial stage when the children legally become adult and can start taking responsibilities.
But at this age too, parents ensure that they help their child not just emotionally but also financially. Now, financial here does not signify to the pocket money; it’s lot more than that. Below, we have jotted down five crucial financial steps parents need to take when their child reach 18. Read on.
1. Gathering Identity Proofs
Identity proofs like Aadhaar card, Permanent Account Number (PAN), driving licence and passport etc., become much more crucial for your child when they turn 18. These documents are required while opening a bank account, mutual fund, stocks investments and so on, which are necessary when someone goes to become financially independent.
Thus, parents should ensure that their child has also these documents made in time so they don’t face issues financially.
2. Ushering Bank & Accounts
Gone will be the days when you will have a joint account with your child once they turn 18. It will be time to set them free and open a new and personal bank account. However, it’s most probably be the parents who will assist the child get their KYC (Know Your Customer) and teach them how to open a bank account, issue cheques, open Fixed Deposit (FDs), Recurring Deposits (RDs) and the list goes on.
At this stage, if the child holds a joint FD, RD or PPF accounts, the parents should request to convert them into individual accounts.
3. Stepping Ahead With Investments
It may seem like a tough task but if children get into investments early, they can benefit in the long term. For this, the parents first need to open a fresh demat account for the child in case they have bought stakes in their child’s name.
Some organizations often just upgrade the current account to an individual one for the child. Also, in case the parents have invested in mutual funds, they need to file an application to convert the minor account to that of an adult.
4. Teaching Taxation
After turning 18, a child will be treated as an adult in all purposes including tax. So, if they have any income which falls under the tax bracket, they will have to pay the tax. In such case, the parents can help child in understanding how taxation works and how can they save their taxes through financial instruments like investment and insurance.
5. Securing Future With Insurance
This is the last but probably one of the most important financial steps in the list. Once a child turns 18, they are eligible to buy various types of insurance plans like life insurance, health insurance, car insurance among other. Even though most of them are not quite necessary at this age, parents can ask the child to buy health insurance since premium is quite low at early age.
By making their child financial responsible, parents can help them a better and prosperous future. For this, they will have to take the first step and make a financial safety net by following the points listed above. To read more such article, start exploring our website.