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How to Talk With Parents About Money - REMIX | Series 10.4
Episode 428th November 2022 • Enjoy More 30s: Family Finance • Joseph P. Okaly
00:00:00 00:09:06

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Open communication with your parents about money may be more important than you think, especially now.

  • So how much are our parents affected? Can they still recover their expenses long term, if they're in these heavily bond weighted portfolios? (03:11)
  • They have a different perspective from us, they're a different generation. (05:37)
  • But there are more and more products coming out that approach risk in different ways. You may come across terms such as buffered annuities or buffered ETFs for example. (07:20)

Quote for the episode: "Just like you should at least be asking your advisor if you have concerns about your own portfolio, your parents really should be doing the same." (07:44)

Securities offered through TFS Securities, Inc., and Advisory Services through TFS Advisory Services, an SEC Registered Investment Advisor Member FINRA/SIPC. TFS Securities, Inc., is located at 437 Newman Springs Road, Lincroft, NJ 07738 (732) 758-9300.

Transcripts

Voiceover Audio:

Welcome to the Enjoy More 30s Family Finance

Voiceover Audio:

podcast. The only podcast dedicated to making life more

Voiceover Audio:

enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

Voiceover Audio:

from simply enjoying life.

Joseph Okaly:

Hello and welcome to the Enjoy More 30s Family

Joseph Okaly:

Finance podcast, and our series REMIX for Rising Rates. In 2022,

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there have been really significant declines across

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pretty much every major asset class through the end of

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October. With rates rising significantly for the first time

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in a long time, it can be a very, very unnerving experience.

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This series is going to attempt to help you with that though,

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going back and re-mixing a number of past episodes to help

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you emotionally navigate these turbulent times. Each week, I'm

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going to be re-mixing a different episode bringing what

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I would say are timeless concepts into light into focus

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of the present day situation. As always, before I begin, please

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share and like please leave reviews. I'd love to reach and

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help as many young families out there just like you.

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Today's episode is the How To Talk With Parents About Money

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REMIX. Parents and money can be one of the most challenging

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scenarios, and we're probably closer to them than anyone else

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in the world. However, many times money, that specific topic

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of money might as well be spelled T A B O O taboo. And the

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biggest reason why this can be challenging is because it

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generally doesn't come up at all until a crisis hits, right? Mom

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and dad can't make their own decisions now or maybe they

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don't know they shouldn't be making their own decisions. Or

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maybe they just ran into some kind of an escalating expense or

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health situation, maybe that decline. All of these things,

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though, can eventually hit children squarely in the face.

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Obviously 100% on board for helping the people that you know

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raised us, took care of us, put food in our mouths, put us on

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track to where we are today. But that doesn't mean the best time

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to start helping is when a crisis already hits.

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With what has happened this year, some of us may be

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wondering just how close to a crisis our parents may be right?

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With 2022 having rates rise more quickly than any other year,

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both the stock and the bond markets have been significantly

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hit. For our parents, if they're invested conservatively in what

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we'd say is the traditional sense, they may be heavily

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heavily invested in bond funds. At the end of this year, October

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of 2022, the bond index, which is the Bloomberg US Aggregate

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Bond Index, or that's the fancy title that I need to make sure

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to mention as well, was down over 15% on the year. The S&P

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500, or the stock market that you hear about on TV was down

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over just 17%. So not too much of a difference. Usually we see

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more of a disparity between stocks and bonds. And that has

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just not happened this year. So pretty much everyone invested in

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a traditional portfolio was hit substantially. The difference

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though, is how will the bond market recover if interest rates

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keep rising? Right? We haven't heard that they're going to stop

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raising interest rates at this point. So how much are our

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parents affected? Can they still recover their expenses long

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term, if they're in these heavily bond weighted

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portfolios? If they have a long term care need, will they still

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have assets to cover that expense now? There can be some

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very legitimate questions out there that you may be wondering,

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maybe wanting to ask your parents. Now if our parents are

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just kind of leaving their money old school, let's say in the

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bank, or in some CDs, that the money really isn't gaining

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anything, they're probably right about where they were. But if

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they are invested in that conservative traditional

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portfolio, they might have 70% 80% or more in bond funds. So

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overall, we may have questions, and they may likely be

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legitimate concerns, but before we run out and ask all these

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questions, ask our parents to open up the books to us, we

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might want to keep in mind that their perspectives may be very

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different than ours. So how can we have that conversation in the

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best way?

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In this original episode, I shared that my daughter Avery

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was four years old at the time of the recording and as any four

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year old, she asked a lot of questions. And specifically

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questions about why this, why that. She really hasn't stopped

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now that she's six, but nonetheless, why the sky is

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blue, maybe why can't we eat chocolate every day? Why does

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green mean go and red means stop? I thought that was a

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pretty good one in particular. But you know, children have this

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completely different lens on the world. And it's just so

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fascinating that they can look at things in a different light.

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And at the same time, it also makes answering their questions

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sometimes somewhat difficult, because they have that different

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innocent perspective. So like when I read David and Goliath to

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Avery, a story that you know, everybody knows David hits

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Goliath with a rock. Avery asked, "Why did David hit him?"

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You know, this is supposed to be the crowning achievement where

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David triumphs over evil, and all Avery could see was that

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David got angry and hit somebody else with a rock. "So aren't we

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not supposed to hit people, Daddy?" you know, those are the

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kinds of questions. And that caught me off guard a little

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bit, you know, do I condone violence? You know, if they

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deserve it, it's okay. So you know, my answer was something to

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the effect of you shouldn't probably hit people Avery,

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right? David was frustrated. Yeah, I think they probably

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talked it out afterwards kind of thing. So yeah, right, wrong or

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indifferent, that's where I went.

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But for our parents, what we need to remember in light of

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this kind of a story is it's not just kids who have different

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perspectives, our parents came from a different generation as

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well. They have a different perspective from us, they're a

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different generation. They probably don't use Venmo.

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They're probably not big on emojis. You know, there are

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differences between us and our parents. So the best way we

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found in bridging this gap is just starting a conversation.

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Asking some simple questions to show that you care vs dictating

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them to just tell you everything. So questions like,

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"Hey, Mom and Dad, you know, I'm just curious, do you use one

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bank? Do you have a number of different banks that you use?"

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Or "hey, Mom and Dad, just curious? Do you pay more more

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your bills online? Do you send in checks? You know, what do you

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feel like works the best for you? Hey, Mom and Dad, just

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curious, you know, do you use your debit card mostly? Do you

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have a number of credit cards you use again, you know what

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works best for you? What are you most comfortable with? If God

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forbid anything ever happened to you? Do you have someplace that

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I should go to to look for documents? Or some person I'm

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supposed to talk to? Hey, mom, dad, you know, just curious, do

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you have medical coverage when at this stage when you're

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retired? I get mine through work. But do you still have

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coverage? Do you know what it covers and what it doesn't?" And

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you know, maybe most importantly, where we are today,

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"Hey, Mom and Dad, you know, just curious, how did you know

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that you could retire? How do you know how long your money is

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going to last, you know? Do you have an advisor or somebody that

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does projections for you to help you with this?" And so this last

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one, again, is especially poignant for purposes of today.

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You might add on here "if interest rates keep rising, mom

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and dad, did your advisor, did you ask your advisor how this

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might affect your portfolio? Did you ask if there are other ways

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to manage risk in addition to bonds that you might be more

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familiar with?"

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Now without knowing their situation, I have absolutely no

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way of knowing what would be appropriate for your parents or

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for you or for anyone's time horizon or goals. But there are

Joseph Okaly:

more and more products coming out that approach risk in

Joseph Okaly:

different ways. You may come across terms such as buffered

Joseph Okaly:

annuities or buffered ETFs for example. Again, no idea if this

Joseph Okaly:

would be appropriate for you for your parents, for any individual

Joseph Okaly:

investor without knowing their full situation. But it's just an

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example of products that manage risk in different ways without

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the use of bonds altogether and in the example of the buffered

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products. Just like you should at least be asking your advisor

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if you have concerns about your own portfolio, your parents

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really should be doing the same. So start a conversation, show

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you care. Ask some simple questions to try to ensure that

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their continued well being is where it needs to be, despite

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what has happened so far in 2022.

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Thanks for tuning in today and join us for next week's remix

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episode, The Stock Market Doesn't Care About Political

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Parties REMIX. Midterms are now past us. What does politics and

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midterms what does that mean when it comes to investments? As

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always, please remember to review and share for others. And

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if you need any help, don't hesitate in reaching out. I

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probably have helped someone just like you. Until next week.

Joseph Okaly:

Thanks for joining me today and I look forward to connecting

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with you again soon.

Voiceover Audio:

The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

Voiceover Audio:

accountant, lawyer or other professional before acting upon

Voiceover Audio:

any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

Voiceover Audio:

Registered Investment Advisor, Member FINRA/SIPC.

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