When you turn 18, in almost all the U.S., you gain the rights and responsibilities of an adult. Known as the “age of majority,” your parents don’t have legal control over you anymore nor a legal obligation.
From this age onwards, you can vote in elections, own property in your name, get married, and enter binding contracts. As exciting as all this sounds, knowing that you suddenly have all these freedoms can feel quite intimidating.
Understanding your financial rights at this age is very important, and you might ask: “Can your parents take your money at 18?”
Until you turn 18, your parents can tell you what to do with your money. At 18, you are legally an adult; your parents cannot take your money, and you can lawfully stop them from doing so.
Financial Independence at 18: Can Parents Access Your Money?
If you opened a savings account as a minor, it’s probably a joint account with one or both of your parents. Typically, accounts for children have no maintenance charges or minimum balances. However, all this might change when you turn 18 unless you qualify for a student account.
Firstly, if you keep this as a joint account with your parents, they maintain the right to withdraw money. Secondly, the account could revert to an adult account, meaning you must ensure that there is always no less than the stipulated amount and pay bank charges.
Therefore, as your 18th birthday approaches, make an appointment with your bank to determine what you need to ensure you have fewer charges on your savings account and how to take control of your money.
Understanding Your Rights: Can Parents Control Your Finances at 18?
Can parents control your finances at 18? Understanding your rights is essential. Parents have a right to tell you how to spend your money until you turn 18.
However, it all depends on your social environment and culture. For example, some families expect their children to start supporting themselves when they turn 18. If their child cannot afford to move out of their family home, they may expect them to pay something toward their upkeep.
In many families, young adults receive financial support until they graduate from college. For others, their parents provide financially for their children after graduation, even if they work full-time, because of the high cost of living.
Becoming financially independent is easier once you have a reliable income. Reaching this milestone depends on two major economic factors: the job market and the current cost of living. According to the balance, in a 2022 study, Savings.com found that half the parents with adult children provide some monthly financial support, amounting to an average of $1,000.
Therefore, parents cannot take your money at 18, but most will provide financial assistance until you reach financial independence.
Empowering Young Adults: Managing Your Money at 18
Managing your money at 18 requires making wise choices. As you reach adulthood, you won’t want your parents to continue controlling you, especially your money.
Having a bank account in your name empowers you as a young adult. However, if you have a bank account from when you were younger together with your parents, there are several reasons why you should consider removing their names:
- Your parents won’t have access to your money: A joint account with your parents means that even if you are 18, they can access your money without your permission. Even though you may think your parents wouldn’t withdraw money that belongs to you, it can happen. You are the only person that can access your account if you remove them.
- Safeguarding your money from creditors: Another danger of having a joint account with your parents is that if they have a financial problem, a court could pass judgment in favor of a creditor getting paid. Since the account also belongs to them, your hard-earned money will help pay off their debts.
- Practice what you’ve learned: Having your own account is the first move you need to gain financial independence. It can help you practice the good money habits you learned from your parents. Now that there is no one to watch how much you spend and what you buy, hopefully, you will have the self-control to spend carefully.
Setting Boundaries: Navigating Parental Influence on Your Finances at 18
At 18, you gain more independence from your parents. However, it’s not always easy for parents to understand that you don’t want them to meddle in your finances and try to control you. Most parents do this because they don’t want you to make mistakes.
When they start interfering with your finances at 18, perhaps the time has come for setting some boundaries, especially if you are earning enough money and managing it correctly.
Perhaps your parents want you to pay rent to them if you are still living at home, or they may want a loan from you. Here’s how to navigate a conversation when your parents exert pressure on you about your finances:
1. Talk About Your Finances
It’s natural to have different perspectives than your parents, but it’s imperative to understand each other’s financial goals. A direct and honest conversation with them about what you can afford and what they can expect from you will ensure they don’t expect more than you can give. If you can’t afford to help with a loan or pay rent, it’s best to say “no” than to tell them you will think about it. Otherwise, they will keep nagging you.
2. Prevent Future Misunderstandings
Discuss any help you need from your parents or what they expect you to contribute toward their household if you don’t plan to move out. Additionally, suppose you plan to loan money from them or extend a loan to your parents; it’s best to avoid misunderstandings by drawing up an agreement with clear expectations of any interest and the repayment plan. These agreements make it easier for you to build your financial independence if you have loaned money from your parents. However, it also helps you keep to your budget if you have lent them money.
3. Get Objective Moderation
If you reach a dead end every time you try to have a conversation about money with your parents, then you need a neutral person to mediate. You might need a financial advisor or therapist, depending on your relationship with your parents.
Taking Charge: Securing Your Financial Independence at 18
Financial independence means having enough revenue to cover your living expenses and bills without help from your parents. It also means being able to save for the future. Not everyone can reach financial independence at 18 because they are studying. Even if they are working, many young people find the money they earn is insufficient to cover living costs.
Here are some excellent tips for securing your financial independence at 18:
1. Avoid Spending on Credit
Spending on a credit card is like taking out a loan. If you don’t pay off the entire balance when it’s due, you pay interest on the outstanding amount. Credit cards are an excellent tool for creating a good credit score, but use them wisely.
The best way to avoid paying interest for things you need is to save money for them first. Your self-control is worthwhile because you pay for something when you can afford it.
2. Learn How to Budget
Thanks to books, websites, and apps, it’s easy to learn how to budget today. There are two critical budgeting rules to remember:
- Your expenses must never exceed your income
- Always know what you are spending your money on by tracking your expenses.
3. Build an Emergency Fund
Building an emergency fund is the best way to save since it provides peace of mind. It creates a worthwhile saving effort for leaner times and teaches you to take saving money seriously. Help your emergency fund grow by placing the money into any account type with compound interest. These include a money market account, CDs (certificate of deposit), or a high-yield savings account.
4. Plan for Your Retirement
You probably aren’t very worried about your retirement as a young adult, but you should start planning now. The money that goes into any retirement account is not taxed; it earns interest, and some companies add to your contribution, helping your retirement savings grow.
5. Insure Your Health
One of the most inexpensive health insurance options is staying on your parental one until you reach the age of 26. Some employers do offer health insurance. However, if you have neither of these options, look for plans with lower rates made possible by the Affordable Care Act.
6. Guard Your Wealth
If you rent, you must protect your home’s contents from theft or fire. You should also insure any property you own, such as a vehicle, home, etc. Insurance will protect you from burglary, fire, etc. You should also protect your ability to earn an income with disability insurance.
7. Start Investing
Get some sound financial advice about investing a fixed amount monthly. Besides building wealth, investing provides financial literacy skills that help you avoid scams.
Read more about securing your financial independence and how to choose a financial adviser on Investopedia.