The child will need an identity proof to conduct financial transactions, so parents should start by helping him apply for a PAN (permanent account number) card, Aadhaar card, passport and driver’s licence. These are the most commonly used proofs and are required for opening bank or demat accounts, investing in stocks or mutual funds and filing income tax returns, among other financial tasks. If the child already has some of these documents jointly with parents, then these should be updated in his/her own name, with his/her signatures and fresh photos.

If the child has a joint account with a parent, he will either need to update it as an individual account or open a fresh one, depending on the bank’s rules. For this, KYC documents need to be submitted along with age proof and often personal verification, after which he/she will be able to conduct all the transactions independently- issue cheques, open fixed or recurring deposits, conduct Net and mobile banking, transfer funds and use personal debit and credit cards. However, he/she needs to refrain from taking any kind of credit or loan at this stage, unless it is for education. If the child already has a fixed or recurring deposit or a PPF account jointly with a parent, these should be converted to independent accounts as well.

If parents have bought stocks in the child’s name, they will have to open a fresh demat account for the child and transfer the shares to it. However, some organisations merely upgrade the existing demat account to an individual one for the child. While it is not a good idea for the child to dabble in stocks so early on, he/she can start investing throug the mutual fund route. If the parents have invested in mutual funds for the child, the latter will have to get the KYC done and then the parents can file an application for the conversion of the minor account to that of an adult.

The child will be treated as an adult for all taxation purposes, which means that any income he/she has will no longer be clubbed with that of the parents. If this amount is more than Rs 2.5 lakh a year, he will have to pay taxes and file returns. If parents have gifted the children any money, it will be tax-free but the income that this amount earns beyond Rs 2.5 lakh will not be tax-free.

An 18-year-old can also buy life, health, vehicle and other insurance policies in his/her name, though it may be too early for this. Since 18-year-olds typically don’t have income or liabilities, they don’t need a life insurance policy. For health cover, if the child is not covered by parents in a family floater plan or by the parents’ employers, it is a good idea for him/her to consider a health insurance policy at an early age because the premium will be low at that stage.