As your child reaches adulthood, their needs grow—and expenses follow. Besides expenses like maintaining a car and having a social life, your teen should think about numerous changes, such as going off to college and living on their own.

To ensure your child can cover all the related costs comfortably, you may wonder—how much money should an 18-year-old have?

There’s no universal answer to this question, so this guide outlines the considerations you should make to ballpark the ideal amount of your child’s savings. You’ll also learn how to help them save up and what else you can do to support a stable beginning of their adulthood.

How Much Should an 18-Year-Old Have in Savings?

There are two ways to determine how much your child should have saved by the time they turn 18:

1. Using savings recommendations based on their income
2. Calculating savings according to their needs

These two approaches aren’t mutually exclusive—combining them gives you the most realistic estimate your child can use to create savings goals.

How Much Should a Teenager Save From a Paycheck?

Source: Allef Vinicius

Financial experts recommend setting aside 10% to 20% of each paycheck, regardless of your age. The sooner your child starts, the more time they have to start their adulthood on the right foot. 

Many teens enter the workforce with minimum-wage jobs. The federal minimum wage is $7.25 per hour, so let’s use that as a reference. If your child works regular eight-hour shifts, they’ll make $1,160 per month. According to the aforementioned recommendations, they should save $116–$232 per month, which amounts to $1,392–$2,784 per year. 

You can use this to calculate the savings target your child should reach by the age of 18. For instance, if they started working at 16, they should save up to around $5,500.

How Much Money Should a Teenager Save To Cover Their Needs?

This approach is slightly more complicated than the previous one, as there are several moving parts to factor in, such as your child’s:

• College plans
• Living arrangements
• Everyday needs and lifestyle

Take time to go through all the relevant details and expenses with your teen. After that, encourage them to save up the amount that would let them cover 3–6 months’ worth of expenses. There’s no one-size-fits-all amount here as it’s entirely individual.

If your child knows they can afford their lifestyle for a few months without income, they’ll have a much more secure start to adulthood. This is often easier said than done, though, as many children struggle to save without a parent’s help.

How To Help Your Child Grow Their Savings

Source: Micheile Henderson

There are many reasons why you may have to jump in and support your child’s savings. They might be unmotivated to set money aside or struggle to find a job that would allow them to save up a decent sum. To help your child build a strong foundation of financial stability, you can take the following steps:

1. Teach them the value of saving
2. Set up a savings account
3. Offer incentives

Emphasize the Importance of Saving

Your teen should get accustomed to delayed gratification to save consistently. This doesn’t come easy to many children, so you should show them some appealing arguments in favor of saving. The most impactful motivators include the following:

• Independence—Most teens look forward to living alone and enjoying more freedom, so tell your child that saving can get them there faster
• College—An average college student has a debt balance of $37,338. Saving can minimize the need for loans and free up their future finances
• Safety and peace of mind—Stress the importance of having an emergency fund, as it can save your child many headaches down the line

Open a Savings Account

Stashing away significant sums of cash is inconvenient. While checking accounts and prepaid cards are solid alternatives, a dedicated savings account is your best option. You can open one for your child and restrict access to it so that the money remains intact until your child is ready to use it.

Another significant benefit of a savings account is that it earns interest. FDIC’s data shows that the average annual percentage rate (APR) is 0.40%, but some banks may offer more. While this may not sound like much, it can help your child achieve their savings goals faster.

Incentivize Saving

Source: Sasun Bughdaryan

Much like 401(k) employer matching motivates people to invest in their retirement, various incentives can encourage your child to save more. When they see a concrete benefit to reducing their spending, they’ll be more likely to practice frugality.

Give your child rewards for reaching their savings milestones. It doesn’t have to be a large sum, but it should be appealing enough to make them think twice before indulging in luxuries.

You can give them a fixed amount or simulate bank-paid interest on their existing savings. Whichever way you go about it, incentives can make a significant difference to your child’s motivation.

Fortify Your Child’s Financial Security Beyond Savings

While saving makes your child’s important life events easier, there’s a high chance they won’t be able to afford everything they need without help. In this case, they’ll likely obtain loans, credit cards, or similar financial products.

While 18-year-olds meet the age requirements for loans in most states, there are other limitations to consider, most notably:

• The CARD Act of 2009—The CARD Act prohibits banks from issuing credit cards to anyone under 21 unless they prove they can repay the debt independently or have an eligible co-signer
• Your child’s credit profile—Without a solid credit profile, your child might not be eligible for the loans they need

So far, the most popular way to circumvent both limitations has been adding your child as an authorized user of your credit card. Doing so gives them access to additional money and creates a credit profile early, leaving your child enough to improve their credit score.

The problem is that your child only builds credit while they’re registered as an authorized user. When you remove them, all credit history associated with the card is deleted from their profile. They need to start building it from scratch, so this is far from the best way to support their independence.

If you want to maximize your child’s creditworthiness in the long run, FreeKick is a much better alternative.

FreeKick—Effective Credit Building and Monitoring

FreeKick—created by Austin Capital Bank—helps parents establish and build credit for children ages 13–25. It combines an FDIC-insured deposit account with automated credit profile building and monitoring services. 

FreeKick handles the credit-building process without ongoing effort on your side—all you need to do is:

1. Create an Account—Sign up on FreeKick.bank and choose a deposit that suits your parents’ budget
2. Set It and Forget It—FreeKick will start building 12 months’ worth of credit history for you and your siblings
3. Keep Growing—After 12 months, your parents can either close the account without any fees or continue building credit for you for another year

FreeKick offers two affordable plans without monthly subscriptions, leaving more room in your budget to support your child’s savings. The following table outlines the available options:

FDIC-Insured Deposit	Annual Fee
$3,000	$0 (Free)
No deposit	$149

How FreeKick Builds Your Child’s Credit Profile

Your child will automatically start building a credit history as soon as your account is active. FreeKick reports all relevant information to credit bureaus if your child has already turned 18 (19 in Alabama). If they’re a minor, their credit history will be reported when they become a legal adult, as credit bureaus don’t accept reporting for minors.

Either way, your child can enter adulthood with up to 48 months of credit history. This will give them a major head start in life, as a strong credit profile can save them over $200,000 throughout adulthood!

You can close your FreeKick account at any point without penalties. Keep in mind that, due to the aforementioned credit bureau restrictions, no reporting can be done for the account if you close it before your child becomes a legal adult.

FreeKick’s Credit Profile Monitoring Services

Leaving a child’s credit profile unattended isn’t a good idea, as it can lead to errors and other issues that must be caught on time. To ensure you don’t need to contact the credit bureau or go through more complex processes, FreeKick offers ongoing credit profile monitoring for free with your account.

Besides keeping your child’s credit information accurate and up to date, credit profile monitoring helps prevent identity fraud, a serious crime affecting one in 50 U.S. children annually. FreeKick gives you peace of mind by safeguarding your child’s information with numerous security measures:

Service	Overview
Social Security number tracing	Tracks all names, aliases, and addresses associated with your child’s SSN to detect signs of true-name and synthetic identity fraud
Dark Web monitoring	Children’s information is often sold on the Dark Web, so FreeKick monitors internet activity related to its trading using the CyberAgent surveillance system
Full-service ID restoration	If your child’s identity is compromised, a certified restoration specialist will work on their behalf to restore it. FreeKick covers ancillary restoration services with a $1 million insurance
Neighborhood sex offender monitoring	Keeps track of all registered sex offenders in your area. You’ll get an alert and a report if an offender registers under a different name but uses your address

Besides the above measures, adult children can use the following services to keep their information safe:

• Lost wallet protection
• Change of address monitoring
• Payday loan monitoring
• Court records monitoring

To build your child’s credit profile without risk and contribute to their financial well-being, sign up for FreeKick.

Featured image source: Alexander Mils