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  • Navigating the World of Cryptocurrency: A Guide for Parents and Teens

    Navigating the World of Cryptocurrency: A Guide for Parents and Teens

    In an era where digital innovation shapes every aspect of our lives, it’s no surprise that our teenagers are drawn to the allure of cryptocurrency. This digital form of money represents a shift away from traditional financial systems. If you’re the parent of teens, understanding cryptocurrency is crucial so you can provide them with the guidance they need to navigate this new world safely and wisely. I’m here to help you learn what you need to know.

    What is Cryptocurrency, Exactly?

    Cryptocurrency, which folks also call “crypto” is, in essence, virtual money that can be used to buy goods and services. It can also be traded for profit, much like stocks. However, unlike the dollars in your wallet, crypto exists only in the digital world. The crypto universe is vast, with thousands of digital currencies out there.

    Crypto is based on blockchain technology, which ensures transactions are secure, transparent, and decentralized, so they’re not controlled by any government or financial institution (there are pros and cons to this that we’ll describe below). Imagine blockchain as a digital Lego tower where each block represents a piece of information, and once a block is added to the tower, it can’t be removed or altered, making it a super secure way to keep track of cryptocurrency transactions – kind of like a high-tech, unbreakable diary.

    A critical component of understanding cryptocurrency is the concept of a crypto wallet. Unlike a physical wallet, a crypto wallet doesn’t store currency; instead, it holds secure digital keys that allow access to cryptocurrencies.

    What Parents of Teens Need to Know

    To the younger, digital-native generation, cryptocurrency is an exciting and innovative concept. They’re not afraid of technology and investing online. They’re aware of the potentially significant returns on investments, stories of cryptocurrency millionaires, and the prospect of being part of a cutting-edge financial movement. This is why crypto is very attractive to teens.

    Parents should know that while there are no laws specifically prohibiting teens from owning or trading cryptocurrency, most platforms and exchanges require users to be 18 years old. For eager and younger investors, custodial accounts present a solution. These accounts allow parents to oversee their teen’s investments, providing a controlled environment where teens can learn about digital currencies.

    These accounts not only allow parents to monitor their teen’s investment activities but also offer a hands-on educational experience in managing and understanding digital currencies. It’s a balanced approach that combines the practical aspects of investing with the security of parental oversight. And if you’re a business owner, you may want to consider paying your kids and then putting up to $7,000 of what you pay them into a Roth IRA using cryptocurrency and a self-directed IRA structure. By doing this, you can invest that $7,000 in cryptocurrency, and let it ride for the next 50 years. Imagine what it will be worth to them then, and it will grow 100% tax-free.

    For more information about custodial accounts and self-directed IRAs invested in cryptocurrency, schedule a call with us.

    Be Aware of the Risks

    While learning how to invest in crypto can be a great learning activity for you and your teen, be aware of the risks involved. For one, the crypto market is highly volatile. Prices can surge or plummet within a short period, making investments speculative and risky. It’s crucial to have open discussions with your teen about the importance of not investing more than they can afford to lose, and about the reality of the speculative nature of digital currency. Teach your teen the importance of research, diversification, and long-term thinking, and you’ll help instill responsible investment habits that will last a lifetime (and make you proud!).

    Most importantly, ensure you know how to get into their cryptocurrency accounts in case something happens, and that someone knows how to get into your accounts as well. The biggest risk to your cryptocurrency investments is that you haven’t documented them such that someone could access your accounts when something happens to you. Contact us and let us help!

    Alternatives and Best Practices

    For families that find direct investment in cryptocurrency too daunting, there are alternative ways to engage with the digital economy. Encouraging your teen to learn about blockchain technology or exploring investments in crypto-related stocks and ETFs can provide a safer introduction to the concepts without the direct risks associated with cryptocurrency trading.

    However, if you’re ready to make a go at it, here are some best practices to keep in mind:

    Foster a Culture of Learning. The rapid evolution of digital currencies makes continuous learning essential. Encourage your teen (and take the opportunity yourself) to stay informed about the latest developments by reading reputable news sources, listening to podcasts, and even speaking with a financial advisor.

    Establish Guidelines. Before your teen makes any financial investment, it’s important to establish clear guidelines. Discuss together how much time and money is reasonable to invest, the importance of privacy and security in digital transactions, and the expectations for responsible behavior. Setting these ground rules early on can lay a strong foundation for healthy financial habits.

    Embrace the Future. Regardless of whether your teen decides to invest in cryptocurrency, understanding this new facet of the financial world is invaluable for you. The rise of digital currencies offers a unique opportunity for parents and teens to learn together about the future of money, technology, and personal finance. It’s a chance to explore new concepts, discuss values and responsibilities, and prepare for a future where digital currencies may play a significant role.

    Prepare Yourself and Your Teen With Our Guidance

    Whatever the future holds, we believe it’s important to educate your children about finances so you leave a legacy of fiscal responsibility when you’re gone. That’s why we help ensure that when you’re no longer here, your assets – including cryptocurrency – are passed on the way you want, easily, and without your family ending up in court and conflict. We do that by approaching estate planning as a relationship – a lifetime relationship with you as your and your family’s trusted advisor so you have someone to turn to in times of change and uncertainty, and in times of joy and excitement.

    To learn more about how we can guide you and your family to secure the future you want, schedule a complimentary 15-minute call with our office.

    This article is a service of Jeannette Marsala, Personal Family Lawyer. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning Session, during which you’ll get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life and Legacy Planning Session.

  • Help Your Parents Avoid These New Financial Scams – Part 1

    Help Your Parents Avoid These New Financial Scams – Part 1

    Fraudsters and scam artists are nothing new, but changing tools and technology are making it easier than ever for scammers to target their victims, especially seniors. To protect your aging parents (or yourself) from these con artists, it’s crucial to equip yourself with the knowledge of how these scams work and what your loved ones need to know to keep their assets and emotions safe.

    In this two-part series, we’ll explore four of the most recent and insidious financial scams that have surfaced, shedding light on their tactics and providing you with practical steps to shield your parents from potential harm.

    01 | THE GRANDPARENT SCAM

    One of the toughest parts about being the victim of a scam is the emotional and mental stress it usually causes. Scammers intentionally use urgency, alarm, or guilt to trick victims into making hurried decisions to send money to someone who needs “help.”  

    In the new “Grandparent Scam,” fraudsters will call or text senior adults pretending to be their grandchild. The scammer will claim that they’re in trouble and that they need the grandparent to send them money right away to bail them out of jail, buy a ticket home from a dangerous location, or pay for damages caused by a car accident.

    In these scenarios, the scammer will usually ask the grandparent, “Grandma, do you know who this is?” to trick the grandparent to reveal the name of their grandchild so the scammer can use that name for the rest of the phone call. The scammer will then ask the grandparent to wire money to “help” the grandchild and ask that the grandparent don’t tell the grandchild’s parents for fear of them getting upset.

    Some scammers are even using AI to disguise their voices while on the phone with the grandparent to sound more convincing. This scam preys on the love and concern our parents have for their children and grandchildren, and can easily cause young or tech-savvy parents to fall victim as well.

    To protect your parents from being victimized by this scam, talk to them about the importance of never disclosing personal or financial information or the names of their loved ones in a text, phone call, or email. Instead, instruct them to ask who the caller is and to wait for the sender or caller to respond. If in doubt, the senior should ask the sender personal questions that only their real grandchild would know, but a scammer wouldn’t. Most importantly, encourage your parents to contact you before wiring or transferring money to anyone for any purpose, no matter what. 

    One strategy we particularly love is to have a family code word or phrase. For example, your code phrase may be “Cosmo is a spotted dog” and that code phrase would be known by everyone in the family so that if anyone is contacted in an emergency situation, the person could ask what’s our family code phrase, and the person calling, texting, or emailing either knows it or doesn’t. And, if they don’t, it’s a no-go for help.

    02 | PICK-POCKETING YOUR CRYPTO WALLET 

    The world of cryptocurrency brings new investment opportunities for those willing to try it out, but with this new financial arena comes new risks and safety measures. 

    In order to store cryptocurrency, you’ll need a digital wallet, as that’s the safest way to hold your cryptocurrency. Your cryptocurrency wallet doesn’t actually “store” money like a traditional wallet; rather, it stores passcodes, known as keys, that allow you to send and receive digital currency to and from the wallet. 

    Wallets come in two forms: hot and cold. A “hot” wallet stores your cryptocurrency in a location that’s connected to the internet—exchange-based wallets, desktop wallets, and mobile wallets. Because they’re connected to the internet, hot wallets are the most convenient, but also the most vulnerable to hacking. 

    A “cold” wallet, conversely, stores your cryptocurrency in a location that’s completely offline. Ironically, the most secure type of wallet for storing digital currency is a cold “paper” wallet. Paper wallets involve printing out your keys and storing them in a secure location. While paper wallets are the most secure option, if you lose the codes, it’s the same as losing paper currency—meaning there’s no way to recover your investment. 

    But no matter what kind of wallet your loved one keeps their crypto in, anyone with the “key” to that wallet can access and steal the funds – no hacking required. 

    How the Scam Works

    To gain access to your wallet, scammers will lure you to give them your wallet’s key by pretending to be representatives of a cryptocurrency company like Bitcoin or Coinbase, or by portraying themselves as a crypto broker. Once the scammer has your keys, your cryptocurrency is completely vulnerable, even if it’s kept in a “cold” offline wallet. 

    With the keys, the scammer can move your crypto out of your wallet and disappear with it forever, and since the cryptocurrency market isn’t attached to the banking system, there’s no way to recover cryptocurrency once it’s stolen. 

    To help protect your parents from these scams, talk to them about the importance of never, ever sharing their wallet keys with anyone besides you and any other trusted family members. This is essential to keep your parents’ crypto investments safe.

    In all cases, whether your loved ones have crypto in a hot wallet, paper wallet, or directly in a crypto exchange, make sure they’ve given you the details of where their crypto is stored and how to access it in the event they’re incapacitated or die. Otherwise, it’s completely lost. 

    If you don’t know how to find and access your parent’s cryptocurrency in an emergency or don’t know how best to plan for your own crypto, please talk with us so we can guide you on how to include your crypto information in your estate plan.

    Helping You Protect the Ones You Love

    Your parents’ financial security is a priority that demands proactive measures, especially in the face of emerging scams that exploit their vulnerability. By remaining vigilant and arming yourself with knowledge of these scams, you can effectively shield your family from falling prey to these fraudsters. 

    But remember, communication is key. Talk openly with your parents about these potential risks, and encourage them to reach out to you or a trusted professional before making any financial decisions. 

    We’re here to guide you through the intricacies of safeguarding your family’s financial future and can make it even easier to protect your parents by helping them establish estate planning tools to record and pass on digital assets like crypto, powers of attorney to help manage their assets, and trusts to protect everything they love for years to come.

    To learn how we can help you protect your parents from these scams, call us today at (650) 600-1735 and stay tuned for the next installment of our series, where we’ll dive into two more financial scams you and your senior parents need to know about.

    This article is a service of Jeannette Marsala, Personal Family Lawyer. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, during which you’ll get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

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