How to talk to your family about crypto  - MoneySense (2024)

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After hearing countless success stories from crypto investors on social media, Martin Dasko, a 36-year-old money blogger in Toronto,could no longer ignore the hype. His father happened to be an early adopter of the cryptocurrency ether (the native coin of the Ethereum platform).But when Dasko brought up the subject of crypto investing in March 2021, he was met with skepticism. His father responded with quips about crypto’s unsustainable growth and wild swings, and he questioned the lack of regulation and corporate governance. Ignoring his dad’s warnings, Dasko went ahead with his own research and decided to invest a small amount of money.

Talking about crypto with your family

With Canadians having different opinions about crypto—not to mention different levels of comfort and familiarity with the asset—you couldn’t bet how someone might respond. So, it can be a tricky topic to discuss with family members. It may be helpful for you to bridge the gap.

“These conversations can involve a type of reverse mentoring, in which young adult children (millennials and Gen Zs) may end up teaching their parents about the blockchain and cryptocurrency,” says Robin Taub, Chartered Professional Accountant and author of The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life (Robin Taub Financial Consulting, 2021). “As digital natives, they seem to have a better grasp of these concepts.”

Navigating family money conversations

It can be a touchy subject, but you have to read the room and know your audience. So, before you even try to get mom and dad to understand, consider your family’s attitude towards money topics. How did your parents discuss money and finances with you when you were growing up?

Maybe they didn’t. “In many families, money is still a taboo topic,” says Taub. “Some of the reasons many parents avoid talking about it are because they don’t have the time or knowledge. They can’t teach their kids because they’re not good with money themselves. They’re ashamed or embarrassed about their own finances or are afraid they’re not equipped to handle sensitive or uncomfortable questions from their kids.”

How do you start the conversation? “Hey, I really want to talk to you about crypto. Can we set aside time?”

It’s good to be direct. Shannon Lee Simmons, a Certified Financial Planner and the founder of The New School of Finance in Toronto, says: “First and foremost, everyone knows that this conversation that we are about to have can be different than normal.” Second, it helps everyone understand the role that crypto may play in their lives.

If your family is already comfortable discussing money topics, you could skip straight to crypto by saying, “I’m curious to learn about crypto as part of my personal finances and would like to start experimenting. Can I talk to you about it?” This approach can help start the conversation even if not everyone understands crypto.

Explaining how crypto works

At its peak in November 2021, the crypto market was worth over USD$3 trillion. Since then, prices have fluctuated and recently rebounded. Crypto has been affected by many of the same factors that influence stock prices—such as supply, market capitalization and competing cryptocurrencies. Crypto’s market capitalization has fallen to about USD$2.55 trillion (as of early March 2024), but interest in crypto investing has remained strong in Canada, especially among those aged 18 to 34.

While younger investors tend to be more optimistic about and willing to invest in crypto, according to the Chartered Financial Analyst (CFA) Institute, their family members may have concerns about it—especially given the fall of a few major crypto firms, including FTX—last November, its founder was found guilty of stealing from customers. Crypto is a highly volatile asset type with wide-ranging risks, so it can be a divisive topic. How can you have conversations about crypto with your family members so that both sides feel comfortable?

Before you explain cryptocurrencies to anyone, make sure you understand them yourself. Here’s a quick guide.

1. Start with crypto basics

Start with the basics: Crypto is both an asset and a new technology. It is meant to be a digital currency. (Some companies and contractors will get paid in bitcoin, for example.) However, at the moment, it’s more of a tradable asset, whether on crypto exchanges or as part of crypto exchange-traded funds (ETFs) listed on stock exchanges.

2. Explain how it’s used

Then, you can get into the more complicated bits. Cryptocurrencies are built on blockchain technology, which is a digital ledger (your parents should know what that is). It logs the ownership of the crypto, and it’s spread across a network of computers that permanently and transparently records transactions. No one can alter the blockchains, and anyone can view them. See, simple enough.

3. Be open to their questions

Don’t get flustered when questions come up. “Why the need for new money?” they might ask. What sets cryptocurrencies apart from traditional fiat currencies, besides being virtual, is that they’re not backed by a central bank or government. Explain that cryptocurrencies carry both benefits and risks. Crypto transactions can be faster and cheaper, but if something goes wrong—say, your digital coins end up in the wrong wallet—there’s no one to intervene (get back your money). And investors treat them more like assets than as actual currencies.

Your parents might also ask about the differences between virtual coins. There are thousands of cryptocurrencies on the market, available via crypto exchanges and crypto trading platforms. Keep it simple by explaining that the three largest coins by market capitalization are bitcoin, ethereum and tether.(We cover more questions below.)

4. Be aware (and communicate that you’re aware) of its volatility and risk

For your own financial literacy and credibility with the fam, you need to know that crypto isn’t instant growth. There may be stories of investors who “got rich quick,” but there are many more stories of those who lost their money. If you express you understand how serious investing in crypto is, it’s more likely your parents will trust your knowledge.
Taub cautions that cryptocurrencies are “alternative” investments, and even within that broad category, they are considered extremely volatile and high-risk.
And Simmons suggests researching Canadian crypto trading platforms and demonstrating how to use one.Showing your parents how you plan to invest may help ease any anxiety they feel about crypto scams, which are common (more on this below). Read our tips on choosing a crypto trading platform.

5. Explain how you will (and won’t) use crypto

Once you’ve started a family dialogue about crypto, Taub says, “As with any investment, the conversation should be about how it fits into your existing portfolio(s) and how it aligns with your goals and investment objectives, your time horizon and your appetite for risk.”

What will you do? Simmons says she has come across people who have focused on big short-term gains, in part due to the “meme stock” phenomenon that began in early 2021 and sensational social media stories about huge crypto wins. She notes that some younger people are investing in crypto not for the long run but to make next month’s rent, or they try to double their money over a short time period, like two months—an incredibly risky way to invest.

Instead of making short-term crypto bets, Simmons recommends a well-balanced portfolio with a small amount of crypto that matches your risk tolerance.

Not only will this help reassure your parents, but thinking about these questions regularly can help you decide whether crypto is really a suitable investment for you, now and over time.

How to answer questions about crypto investing

Here are a few questions your parents might ask about buying and selling crypto.

1. “Isn’t crypto as risky as gambling?”

Family members may be concerned about how fast and easy it is to lose money in crypto trading. Likely, when your parents were young, investing meant calling up a broker or investment advisor on the phone and placing an order, then waiting a few days for the trade to settle. These days, it takes just a few taps on a smartphone app—something that wasn’t possible even a decade ago. If you purchase a bitcoin ETF, the trade can happen somewhat instantly. But if you’re trading on a cryptocurrency exchange, it can generally take 10 to 30 minutes—still much faster than expected.

You might be able to ease your parents’ minds by explaining your approach to crypto investing—such as doing your own research, sticking with the more established coins, using a reputable trading platform, storing your crypto securely, and focusing on long-term profits rather than making short-term, social-media-fuelled bets. You could also talk to your family about the increasing regulation in the crypto industry and how this will benefit investors.

2. “What if you lose money on crypto?”

It’s very possible to lose your entire investment in crypto. That’s why you’ll often hear the advice: “Don’t invest more than you can afford to lose.”

Crypto had a turbulent year in 2022, with bitcoin and ethereum both dropping more than 60% and settling into lows in 2023. Prices seem to be recovering in early 2024, leading some observers to say the crypto bear market may be ending—but that’s cold comfort to parents who are afraid their kids are throwing money away on a risky asset.

Parental concerns aside, think about what you’ll do if your investments go up or down in value. How will you decide when to sell your crypto or buy more? What if the value of your holdings falls dramatically—can you ride out the volatility, financially and emotionally?

Canadian personal finance experts have noticed differing reactions among their clients who have lost money on crypto in the past few years. Simmons says those who followed the advice to invest a small amount were open to seeing what would happen in the long run. They didn’t stress out too much and didn’t try to gamble it away. Whereas, some clients who won big and experienced the euphoria of several crypto gains kept investing more, believing crypto values would keep rising. But when their investments tanked, some lost tens of thousands of dollars and were humbled by this harsh financial lesson.

On Telegram, a social networking app that’s popular in the crypto community, Dasko has witnessed investors chase after meme coins—like dogecoin, shiba inu and safemoon—in hopes of scoring outsized returns. He says that people share a lot of success stories on social media. Afraid of missing out, others join in—but by then, prices have gone up, and there’s no guarantee of a profit. Sometimes, the hype is engineered to lure investors into what is, ultimately, a scam.

Simmons reminds investors, “At the end of the day, if we are using crypto as an investment vehicle, treat it like a very volatile alternative investment. Don’t try to game it over the short run, because you could win or you could get burned.”

3. “What about crypto scams?”

Of course, your parents are concerned about crypto scams. In 2023, the Canadian Anti-Fraud Centre (CAFC) received 4,010 reports of investment fraud from 3,631 victims for a total of $309.3 million. Only a small fraction of scams are reported, so the actual figure is likely much higher.

To address your family’s concerns, you could tell them how you’re protecting yourself from common crypto scams like “pump-and-dumps” and giveaway scams. Bottom line: If something sounds too good to be true, you know that it probably is.

Simmons recommends using a reputable crypto trading platform you know and trust, adding, “Buyer beware with anything you see on social media.”

Another step potential investors can take is to check the registration of crypto trading platforms in Ontario through the Ontario Securities Commission (OSC) and elsewhere in Canada through the Canadian Securities Administrators (CSA) before handing over their money. This can help you avoid scams and any service providers that don’t meet regulatory requirements.

What if your parents want to invest in crypto?

With the recent launch of bitcoin ETFs, maybe your parents are the ones asking you about crypto investing. As a young investor in Canada, you have more time to recover from any potential losses, but older adults like your parents don’t have that luxury. Encourage them to be cautious.

For both adult children and older adults who are thinking about adding cryptocurrencies to their investment portfolio, financial experts typically say that a low amount or percentage allocation to crypto may work in a diversified investment portfolio that also contains lower-risk investments. For example, buying a crypto ETF that makes up 1% to 5% of your portfolio, while the rest is invested in other assets such as index funds.

“Because cryptocurrencies are extremely volatile, a large allocation may not be suitable for a more conservative portfolio,” Taub warns. Investors who are nearing retirement may need to re-evaluate their investment strategy to ensure they aren’t heavily invested in volatile assets.(Read more about crypto investing close to retirement.)

If your parents need advice on their investments or retirement planning, they may benefit from talking to a financial advisor.

Be cautious with crypto

Remember, don’t throw caution to the wind. Can you make lots of money in crypto over the short term? It’s possible, but you could also see your investment crash and burn, like many Canadians have.

“Make sure you are only using an amount of money that you could afford to lose,” says Simmons. (Yes, we’re repeating this.) “If you aren’t willing to part ways with it, then think long and hard before you invest into something so volatile.”

Can crypto fit into a long-term investment strategy? Maybe, if you’re willing to HODL (hold on for dear life) and your portfolio is otherwise diversified and well balanced.

Another thing to note: Crypto earnings are taxable, either as capital gains or business income. Don’t wait for the Canada Revenue Agency to ask you about it—by then, you may already owe them interest and/or a fine on top of taxes.

The crypto landscape is still evolving, and its future is uncertain. Keep doing your research, and maintain an open dialogue with your parents so that you can learn together.

Although Dasko’s father knew more about crypto than you might expect (he’s still an ether investor), Dasko still leaned on his own research for his money blog, Studenomics, to see if it was a mere fad or a worthwhile investment. And as you might expect from a millennial, he quickly grasped how cryptocurrencies work. Together, they better understood crypto when Dasko explained its uses.

Read more about crypto:

• Crypto marketing: What can be said—and not said—in Canada?
• How to protect your crypto from hacks
• Which cryptos will survive in the long term?
• How to gain exposure to crypto without buying it