Suggestions for an 18-Year-Old

Raymond Eustace | May 30, 2024

Background

With high school graduation season upon us, this article offers suggestions for an 18-year-old to consider regarding financial, legal and medical matters. Although the advice is applicable to any young adult, we highlight reaching the age of eighteen years old, as certain rights and privileges that had been extended to their parents up to that point no longer apply once a child reaches the age of 18. We will cover a range of financial matters, information access and decision making, and civic-related actions.

Actions related to Financial Accounts

Open a Bank Account

If you do not already have your own checking and savings account, it is time to open them. You can add a parent as a joint account owner if desired, to allow them access to the account if necessary – this is particularly helpful if you are going to be away from home for extended periods due to college, military service, or other reasons to allow your parent to easily transfer assets into or out of the accounts.

You may want to consider an online bank such as Ally. They offer excellent yields on checking and savings accounts, easy account access, no minimum deposit levels, free direct bill payments and a range of other offers including credit cards, mortgages and auto loans. https://www.ally.com/.

Order a Credit Report

Although you may not have a credit history, turning 18 is an ideal time to order a credit report to verify that nothing is inappropriately connected to your Social Security number. Minor children are a popular target for identity thieves, and it is wise to check for any issues and resolve them as soon as possible. Instructions on how to check your credit reports, what to look for, and how to resolve issues and freeze your credit reports can be found in an earlier Advisor Insights article at: https://www.eustaceadvisors.com/blog/how-check-and-manage-your-credit-scores-and-credit-reports.

Apply for a Credit Card

You should apply for a no-annual-fee credit card as early as possible. However, it is important that you use the card responsibly and pay it off in full every month – a simple way to ensure this happens is to set up automatic monthly payments from your checking account to the credit card provider.

You may need to start with a Secured credit card, which requires you to establish a security deposit until you build up a sufficient credit score to allow for unsecured credit. Good resources to assess various credit card options and compare them side-by-side include:

https://www.bankrate.com/finance/credit-cards/

https://www.forbes.com/advisor/credit-cards/how-to-get-a-credit-card-for-the-first-time/

Build Your Financial Literacy

Everyone should have a basic education in personal financial management. Too often, this is left to be learned through experiences, but in many cases the experiences are negative because the person did not have foundational knowledge to help make wise decisions.

There are a lot of resources available to gain knowledge related to personal financial management, covering topics such as budgeting, establishing credit, managing expenses and debt, taxes and the basics of insurance.

A good starting point to assess free financial education resources can be found at: https://money.usnews.com/money/personal-finance/family-finance/articles/worthwhile-online-personal-finance-courses.

Another option is a fee-only financial advisory firm such as Eustace Advisors, which offers financial education services which can be tailored to your interest and needs.

Actions related to Representation and Access to Medical and Financial Records

In most states, parents lose their authority to access medical, education, legal and financial account information related when their child turns 18. When the child reaches that age, they are also limited in actions they can take on behalf of the 18-year-old related to financial and legal matters.

Ideally, you should coordinate with your parents to discuss these next steps, and we recommend you consult with an attorney or other legal resource for guidance on the process to establish the documents cited below and the factors to consider when putting such legal documents in place.

Once you establish the documents listed below, it is important that you safely store the documents and let the people selected as proxies, POAs, executors and access persons know where to find the documents in case they are needed.

Create a HIPAA Release Form

Because of the Health Insurance Portability and Accountability Act (HIPAA), health care providers are not legally permitted to disclose an adult’s medical record or discuss their health status to anyone else, even if that adult is still on their parent’s health insurance plan. If you want your parents, or another party, to have access to your medical records and to discuss your health status with medical professionals, establish a HIPAA medical information release form.

Sign Health Care Proxy and Power of Attorney Documents

Once you reach the age of 18, your parents no longer have default legal rights to make decisions or take action on your behalf, even if you are incapacitated. At this age, you need to establish documents to define who you elect to make such decisions and take actions on your behalf, if you are unable to do so – the persons selected are referred to as your agents. The agents you elect for these roles should be people you trust to act on your behalf and need to be made aware of their selection and how to access these important documents in case they are needed.

A health care proxy allows the named agent to make health care decisions on your behalf in case you are unable to make such decisions on your own due to injury or illness.

A durable power of attorney allows the named agent to act on your behalf regarding legal and financial matters. This could include bank transactions, signing contracts and income tax returns, and overseeing investments. There are different types of power of attorney structures (general, durable, springing) – you can establish the type that best serves your intended purpose.

We recommend you select both a primary and alternate agent for each of the roles defined above. You might appoint a parent, sibling, other relative or close friend as your agent. The person you designate as your health care proxy does not need to be the same person you name as your power of attorney to make financial decisions.

Create a Will

For many 18 year olds, creating a Will is not as important as establishing the documents listed above, as you may not have any real assets and likely do not have minor children for whom to name a guardian. For those of you with an asset base, a Will allows you to define who will manage your affairs in case you die, and how your assets should be distributed.

Other Important Actions to Take

You are now old enough to vote and should take the time to register and learn about procedures related to absentee voting in case you will be away from home due to military commitment, college or other endeavors. You can start this process at: https://www.usa.gov/register-to-vote.

Males are also required to register with the Selective Service System within 30 days of turning 18. This can be initiated online at: https://www.sss.gov/.

Establish a FERPA Release of Information Form

If you are heading to college, the Family Educational Rights and Privacy Act (FERPA) allows you to limit access to your academic records. If you want your parents or other parties to have access to your educational records, establish a FERPA release form at your education institution. Specific FERPA-related processes and forms vary by institution and will typically be available on the institutions website and at their Registrar’s office.

Many higher education institutions also have their own HIPPA Release Authorization forms. You can elect to complete the school’s HIPPA release form, or you should be able to provide a copy of a general HIPPA Release Form established per the previous section, which can be used by any educational or medical institution.

Name beneficiaries on all financial accounts and life insurance policies

As you establish retirement savings plans, investment accounts, bank accounts and life insurance policies, it is important that you name beneficiaries and Time of Death (TOD) recipients in line with your wishes. This is a simple step to take when creating the accounts and policies, and to modify if your situation changes. In most states, the assets of an unmarried person with no descendants will pass to his or her parents by default, unless others are named as beneficiaries or TOD recipients on the accounts or in the person’s Will (next topic).

My Social Security Account

You should consider establishing a “My Social Security” account to ensure no one else is able to access your Social Security number with the Social Security Administration and to periodically confirm your employment history. To set up this account, go to www.ssa.gov/myaccount/.

If you will be traveling away from home by automobile on a regular basis, consider signing up for an emergency roadside assistance plan that protects you whether in your vehicle or if you carpooling in a friend’s vehicle. Many auto insurance companies offer such a plan as an add-on to a vehicle’s coverage, or you can select an independent plan such as AAA or Good Sam.

Summary

Becoming an adult, often defined as reaching the age of eighteen, is a significant lifetime milestone. As an adult, you will need to manage financial, legal, medical and insurance matters that you did not have to worry about before. You may find it helpful to talk to a financial professional for assistance and when considering taking the actions recommended above.

Resources

*This content was developed from sources believed to be providing accurate information. The information provided is not intended as tax or legal advice, and readers are encouraged to seek advice from their own tax or legal counsel. Neither the information presented, nor any opinion expressed, constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Eustace Advisors to provide information on a topic that may be of interest. Copyright 2024 Eustace Advisors.

Suggestions for an 18-Year-Old