Turning 18 is a big milestone not just for children, but also their parents. For parents, seeing their child turning 18 is the start of a new phase for them and for their children as well. As a child, he or she becomes eligible to get a driving license, start voting, conduct financial transactions, etc. As parents, it is their responsibility to introduce children to financial rights, banking and finance.
So what steps can you take to make this transition easier for your newly turned adult? Let’s take a look at the financial checklists.
1. Banking
Youngsters who have a shared service with their parents should either refresh their records as an individual record or open a new record. As a rule, banks will request their KYC archives alongside their age confirmation and sometimes, individual check. When your youngster finishes these conventions, they can without much of a stretch manage monetary exchanges freely, issue checks, open Fixed or Recurring Deposits, lead net and portable financial exchanges, move reserves and have their own Debit and Credit Cards. On the off chance that your kid holds a Fixed or Recurring Deposit account or a PPF account with you, they will likewise need to change over these records into free records.
2. Identity Proofs (PAN, Passport, Driving License)
Since the child will need an identity proof for conducting all financial transactions, the parents should start by helping him apply for a PAN (permanent account number) card, Aadhaar card, passport and driver’s licence. These will be required for opening a bank or demat account, investing in stocks or mutual funds and filing tax returns, among other financial tasks. If the child already has some of these documents jointly with parents, these will need to be updated in their own name, with their signatures and fresh photos.
3. Taxation
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.
4. Conversion of FD/RD
If you have opened an FD/RD in the name of the child it’s time to convert them into normal FD/RD’s similar to bank accounts.
You have to remove the guardianship from the account and update your child’s bank account to which the maturity proceeds are to be credited.
5. Insurance
An 18-year-old is at a legally permissible age to to buy Life, Health, Vehicle and other 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.
6. Conversion of MF/Demat account holding
To convert the MF/Demat holdings from child’s account to normal unitholder account, the first step is to update the KYC.
- PAN
- KYC form
- Address Proof
Submit a request to change the status to MF holding from minor to major.
For Demat conversion your child has to sign a new agreement with the Depository Participant such as NDSL or CDSL. Also link their banking account with the trading account.
7. Investments
If you have made an investment in your child’s name you will require to get it updated. For instance, if you have invested in chid’s name then you will have to open a fresh demat account and transfer the shares to it. It is advisable to introduce your child to investing that too via mutual funds.