Your Child Has Turned 18: What Changes Financially?

Recently, our son turned 18.

Somehow, without us quite noticing, we now only have one “child” left in the house… and four adults.

Which feels both wonderful and slightly terrifying in equal measure.

Whilst turning 18 is a huge milestone emotionally, it's also a significant milestone financially. A surprising number of things change overnight, yet many families don't realise quite how much until the birthday arrives.

So, what actually changes when your child becomes an adult?

The Junior ISA Becomes Theirs

For many families, this is the most obvious financial change.

Once a child turns 18, their Junior ISA automatically becomes an adult ISA. They gain full control over the account and can decide whether to leave the money invested, continue contributing, withdraw some of it or spend it entirely.

For parents who have spent years building up savings for their child, handing over the reins can feel both exciting and nerve-racking.

But perhaps the real success of a Junior ISA isn't the value of the account. It's helping a young adult understand the opportunities that money can create and how to use it wisely.

Child Benefit May Come to an End

Depending on your child's circumstances, turning 18 can also affect the income coming into the household.

If they finish full-time education or approved training, Child Benefit will usually stop, which can have a noticeable impact on family finances.

For many parents, this is one of the first reminders that the financial landscape is changing.

More Savings and Investment Choices Become Available

Turning 18 opens up a wider range of savings and investment opportunities.

Whilst many young people will already have a Junior Cash ISA or Junior Stocks & Shares ISA, they now gain full access to those accounts and can also start building their own ISA strategy as an adult.

This means they can hold multiple types of ISA, depending on their goals and circumstances, whilst continuing to benefit from valuable tax advantages.

One option that becomes available at 18 is the Lifetime ISA. Although the government is currently reviewing the Lifetime ISA and there has been ongoing discussion about potential changes, it remains a valuable savings tool for many young adults looking to save towards their first home or later life.

The biggest difference isn't necessarily the number of accounts available. It's that the decisions are now theirs to make.

Building a Credit History Begins

Turning 18 is often when young adults begin to establish their own financial identity.

Mobile phone contracts, credit cards and other forms of borrowing can all contribute towards building a credit history.

Used sensibly, these can help establish a strong financial foundation. Used carelessly, they can create challenges that take years to undo.

This is often the perfect time to start conversations about borrowing, budgeting and financial responsibility.

Pensions Start to Matter

Many people assume pensions only become relevant when you start full-time work, but that's not actually the case.

A pension can be started from the day a child is born. However, turning 18 is often the point at which a young adult begins to take ownership of their long-term financial future.

Whether through a workplace pension, a personal pension, or a combination of both, they now have the opportunity to start building something incredibly powerful.

Whilst retirement may feel impossibly far away, time is one of the most valuable assets an investor has. The earlier someone starts saving, the longer their money has the opportunity to grow.

At 18, most young adults won't have significant amounts to invest, but they do have something many older investors wish they had more of – time.

They Can Take On Important Financial Responsibilities

One of the less obvious changes at 18 is that young adults can take on certain financial responsibilities and roles that were previously unavailable to them.

For example, they can act as a trustee, be appointed as an attorney under a Lasting Power of Attorney or serve as an executor of an estate.

Whilst these may seem like issues for much later in life, they are all roles that involve managing money and making financial decisions on behalf of others.

It's another reminder that turning 18 isn't simply a birthday milestone. In the eyes of the financial world, it marks the beginning of adulthood and all the responsibilities that come with it.

A New Level of Financial Independence

Perhaps the biggest change isn't a specific product or allowance.

It's the shift from parents making financial decisions on a child's behalf to a young adult making those decisions themselves.

For the first time, they may be managing their own income, savings, spending and financial goals.

That can feel daunting, but it can also be incredibly empowering.

The habits they develop now — saving regularly, avoiding unnecessary debt, understanding investing and planning ahead — could have a greater impact on their future financial wellbeing than almost anything else.

More Than Just a Birthday

Turning 18 isn't simply about gaining access to money. It's about gaining responsibility for it.

As parents, we spend years teaching our children to walk, talk, ride a bike and navigate the world around them.

Perhaps one of the most important skills we can help them develop is understanding how money works.

Because whilst watching your child become an adult can feel slightly terrifying, helping them build confidence with money may be one of the greatest gifts you can give them.

The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief is generally dependent on individual circumstances.

An investment in a Stocks & Shares ISA will not provide the same security of capital associated with a cash ISA.

Please note that St. James's Place does not offer Lifetime or Cash ISAs.

Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.