Your child may have heard the terms cryptocurrency or bitcoin, seen the flashy cryptocurrency videos on TikTok, or discussed the topic with friends but still don’t fully grasp their meaning. Or they may be familiar with these terms and have a desire to buy electronics or toys with crypto, or invest in digital currencies. Or they may have no interest in cryptocurrencies.
Whatever the situation, part of good parenting is to help your children understand the complexities of the financial world. Although some economists may disagree on the longevity of the cryptocurrency, it is likely to exist for years to come, and some experts believe it could outpace cash and credit card spending by now. five to 10 years. Crypto can spark a lot of interest in your child.
Key points to remember
- It’s your job to help your kids understand the intricacies of the financial world, and cryptocurrencies can spark a lot of interest in your kids.
- You can help your child research the topic by consulting reliable sources, focusing on how to separate reliable information from potential downsides.
- It is important to communicate to your children that cryptocurrency can lose value, making it risky to own.
“Teaching money [almost] begins at birth,” explains Joyce Serido, Associate Professor and Family Social Science Extension Specialist at the University of Minnesota, which specializes in financial parenting. If kids have been given a solid foundation in how money and currency translate into value and purchasing power, they are well on their way to understanding crypto. It’s around pre-adolescence, she adds, that children can heighten their demands for crypto and feel ready to use it.
The resident expert in cryptography at the Carlson School of Management at the University of Minnesota, accounting professor Vivian Fang, notes that she is years away from teaching her five-year-old son crypto. Until then, she teaches him the value of money through lessons on how to win and lose and how to work for money.
In addition to a weekly allowance of $5, Fang pays her son in quarters for chores, such as a quarter to help with the dishes and two quarters to help walk the dog. He can also suffer losses in the form of a fine imposed by his parents, if, for example, he behaves badly during a swimming lesson. Fang has seen how savvy a shopper his son has become. Working from the idea of using his own money, his youngster will either make a purchase or leave after deciding an item is “too expensive”. In a few years, he’ll probably be interested in crypto too, as millions of older kids are doing now.
Let’s say your kid is ready to get into crypto. You can help your child research the subject by consulting reliable sources, such as Investopedia., which explains in plain language what cryptocurrency is and the potential risks and benefits. Also take a look at social media sites together, like YouTube, which is full of how-to videos.
Many kids are drawn to TikTok, so don’t leave that aside, as it can be an educational opportunity to review their crypto videos together. The site features plenty of videos, including some of unsavory influencers making wild get-rich-quick claims, punctuated by images of Ferraris and Rolls-Royces parked in front of stylish homes. By looking at different types of information, you help your child distinguish reliable information from potential downsides and become a smarter consumer.
What is Crypto?
A cryptocurrency is a decentralized digital currency that relies on cryptography for security. Help your child understand that crypto can be used like traditional fiat currencies, such as the US dollar and Mexican peso, as an investment and to pay for everyday goods and experiences. As of March 3, 2022, there were over 17,900 digital currencies with a combined market capitalization of $1.8 trillion, according to CoinMarketCap. By far the biggest is Bitcoin (BTCUSD), released in January 2009 by likely pseudonym Satoshi Nakamoto and currently worth over $42,000 per digital coin.
Early digital products were easy to replicate, which was an inherent challenge of digital currencies until Bitcoin was introduced with security measures in place. Now, the use of cryptography and blockchain technology ensures that cryptocurrencies are almost impossible to counterfeit or double spend, despite being digital.
Blockchain is basically a distributed ledger enforced by a varied network of computers. No central authority issues cryptocurrencies, which theoretically makes them immune to government interference or manipulation. While some crypto investments require the trader to be at least 18 years old, others have no age limit. Even with an age condition, you can also invest for your minor children up to their 18th birthday.
Here’s what else to tell your child about crypto: 6 tips
- Growing popularity. Cryptocurrency is like fiat or traditional currency because you can use it to purchase items and services. it’s different, though, because it’s digital only. One of the easiest ways to spend cryptocurrency at retailers and vendors is to purchase gift cards through platforms like Bitrefill. Retailers that accept crypto include Starbucks Corporation (SBUX), Live Nation Entertainment, Inc.’s Ticketmaster.com (LYV), Best Buy Co., Inc. (BBY), Target Corporation (TGT), Burger King, and Yum. ! Brands, Inc. (YUM, parent company of KFC, Taco Bell and Pizza Hut).
- To install. You need to create a crypto account where your funds are stored. You can do this through Coinbase, which is a cryptocurrency exchange that offers many currencies and payment methods. You buy cryptos with traditional currency using debit cards or bank accounts.
- Accessibility. Crypto funds are always available anywhere in the world as they are not tied to any bank or government.
- Security. Cryptocurrency can be safer to use because you don’t need to provide personal information to a vendor, reducing the risk of identity theft or fraud.
- Highs and lows. Cryptocurrency is volatile, which can be good or bad. Let’s say you have $100 in your crypto account. The value may increase, which means you have more in your account. However, if its value drops – to $25, for example – there is nothing you can do to recover the lost funds, but wait, hoping the value will increase. This may not be the case.
- Not a video game. While the games Roblox and fortnite use virtual currencies called Robux and V-Bucks, respectively, these are fantasies that have no cash value in the real world. While playing, you can lose Robux, but you don’t lose real money. Investments in real cryptocurrency, on the other hand, can generate real and often significant losses.
Given the likelihood of cryptocurrency having a continued and possibly growing impact on the global economy, this may be an important consideration when it comes to the financial education of your children. In addition to helping your children track down reliable information, it’s important to be upfront with them about the risky nature of cryptocurrency investing.