Isn't That Rich Podcast

An 18th birthday feels like any other birthday. There is cake, and there is a big happy post going up on social media. But behind all the celebrating, something real is happening. In the eyes of the law, your child just became an adult. It is officially called the age of majority, and it changes more than you might expect.

On this week's episode of Isn't That Rich, we walked through everything that shifts the day your kid turns 18, and what you can do ahead of time so nobody gets caught off guard. Here is the rundown.

First, the big surprise for parents

Once your child hits the age of majority, you do not automatically get to see or touch their money anymore. If you were the custodian on an account, or you were used to logging in to move a little money around when they ran low, that access can change overnight. This catches a lot of parents off guard, so it is worth understanding before the birthday arrives.

A big part of what happens depends on the kind of account your child has, and there is a real difference between a joint account and a custodial account.

The everyday bank account

Most families set up a plain checking or savings account for their kids when they are little. Usually that is a joint account with the child listed as a minor, and you can see everything that moves through it. For years, that setup works beautifully.

Here is the good news. When your child turns 18, a joint account simply keeps being a joint account. Both of you are still owners, both of you still have full access, and nobody falls off. That also means the money in a joint account legally belongs to both people on it. Either owner can withdraw it or use it, which is worth thinking about as your child steps into adulthood.

This is a great moment to come sit down with your banker together, with your child there too, and set things up the right way now that they are an adult. Sometimes we can even take an owner off the existing account rather than closing it and starting over. And if your child wants an account that is entirely their own, they can open one on their own now.

The custodial account and the age 21 rule

A custodial account is a little different. Say a parent opened one when the child was born so that grandparents and other family could drop in birthday and holiday money over the years. That money legally belongs to the child, and the custodian manages it on their behalf until the child is old enough to take over.

Now here is the part that surprises people. In Illinois, a custodial account does not turn over to the child at 18. It turns over at 21. So even after your child becomes a legal adult, you are still managing that account for three more years. Every state handles this a little differently, so this one is specific to Illinois. When the time comes, you would sit down with us and move that money into an account of their own.

Credit cards and building credit

Building credit early is one of the kindest financial head starts you can give a young person. Good credit is what helps them rent an apartment or eventually qualify for a home loan. Without any history at all, they can end up what we call a credit ghost.

One of the smartest early moves is adding your child as an authorized user on your credit card. Depending on the card company, you can often do this well before 18, sometimes as young as 13, and some cards have no minimum age at all. Your good habits carry over to them while they are young. Just remember it works the other way too. If your own credit habits are rocky, that carries over as well, so this only helps when you are using credit wisely yourself.

When your child is ready for a card of their own, know that turning 18 does not guarantee approval. A credit card is really a line of credit, which is a loan, so card companies will still check that your child has income and can pay it back. There are plenty of student cards built for this age, often with cash back on gas and everyday spending. The most important thing is to sit down and teach them how a card actually works, how to make payments on time, and how quickly interest adds up if they carry a balance. A small credit card lesson at 18 can save a big credit card headache in college.

Savings and that first emergency fund

Savings accounts do not get enough love, and we will keep preaching this one. There is almost nothing better for a young person's financial life than the simple habit of putting money away.

Start with an emergency fund. Up to now, your child has had you as their safety net, one phone call away when the car battery dies two hours from home. An emergency fund is how they start becoming their own safety net. It is a quiet, powerful thing to teach at this age.

The Roth IRA, our favorite

If there is one thing we want you to take away from this whole conversation, it is the Roth IRA. If your 18-year-old has a job and earns money, whether it is a summer gig or a few shifts after school, they are allowed to put some of that income into a retirement account called a Roth IRA.

We know what you are thinking. They are only 18. But there is truly no such thing as too young here. So many people come to us at 30 asking whether they should open a Roth, and the honest answer is that the best time was ten years ago. The second best time is today.

For 2026, the annual contribution limit is $7,500, and you do not have to contribute the whole thing. Even $500 tucked away at this age can matter down the road. Here is a bonus a lot of parents miss. You can gift money into your child's Roth up to the amount they actually earned that year. So if your child made $5,000, you can help fund their Roth up to that $5,000, as long as it does not go over what they earned. We still believe in teaching kids to put some of it away themselves, but that gift option is a wonderful way to give them a head start.

One more lesson worth having early. It can be tempting to pull retirement money out for a truck or something else shiny, but pulling money out of retirement accounts early usually comes with a penalty, and you lose all that growth you were counting on. The goal is to leave it alone and keep adding to it.

A quick word on Trump Accounts

Before 18, you can also open what is called a Trump Account for a child, and contributions can grow there before rolling into a traditional IRA down the road. Giving to one is genuinely easy these days. We have a full episode and write-up dedicated to Trump Accounts, so if that one is new to you, go give it a listen for all the details.

The 529 college savings plan

Someone in your family may have started a 529 plan, which is built specifically for education costs. If your child is heading to school, this is the account you tap for tuition and related expenses.

Here is something reassuring for parents. Even at 18, you stay in charge of the 529. Your hand never really comes off it, so this remains your responsibility to steward. And if your child does not use all of it, or their path changes, the money is not stuck. You can roll leftover 529 funds into a Roth IRA for that same child, up to a lifetime limit of $35,000 per beneficiary, spread across years and subject to the yearly Roth limits. Money you saved for school can quietly become money for their retirement.

The legal documents nobody thinks about

This might be the most overlooked part of turning 18, and it has nothing to do with account balances. Once your child is a legal adult, you are no longer automatically their medical or financial decision maker. If they end up in the hospital, you are not automatically the one who can step in or even get information.

There are two key documents that fix this. The first is a medical power of attorney, sometimes called a healthcare power of attorney, which lets your child designate you to make medical decisions if they cannot. The second is a financial power of attorney, which lets you handle their money and legal matters on their behalf if they are unable to. Your child chooses who that person is, and they can change it later if life changes, say when they get married.

We know this is a heavy thing to bring up right after the party. Nobody wants to say happy birthday and then head to the attorney's office. But before your child leaves town or heads off to school, this is exactly the kind of precaution that gives everyone peace of mind.

Taxes are part of adulthood now

Once your child is an adult, they generally need to start filing their own taxes. This is where things can get tangled, so a little coordination matters. If you are still claiming your child as a dependent, they need to file in a way that matches that, or you can end up with a real mess on both returns.

The first time through, walk them through it so they do not make a costly mistake that has the IRS knocking. If you already work with a tax advisor, this is a lovely moment to make the introduction. Which brings us to our favorite takeaway of all.

Help them build their team

One of the best gifts you can give a new adult is a trusted group of people to call. When your child already knows their banker by name, has met the family attorney, and has a tax advisor to reach at filing time, they know exactly who to turn to when a question comes up. Make those introductions together while they are still under your roof. It is so much harder to do once they are gone.

The bottom line

An 18th birthday is not just a birthday. It is a real milestone, legally and financially. If your child is turning 18 this fall, you have this whole year at home to teach them these things, and maybe even do their taxes together that first time. A weekend spent on this now can put them years ahead later.

If you have a child turning 18, or even if they are not quite there yet, come see us. We would love to help you set things up the right way, and while we are at it, we just might get that new adult started with an account of their own.

Stop by any Farmers State Bank location in Alto Pass, Harrisburg, Herrin, or either of our Marion branches, and let's map it out together.

This post shares general information from our podcast and is not personalized financial, tax, or legal advice. For guidance on your family's situation, sit down with your banker, and talk with your own attorney and tax advisor.