How to Teach Your Child About Cryptocurrency

Your child may have heard the terms cryptocurrency or Bitcoin, seen the flashy videos about cryptocurrency on TikTok, or discussed the subject with friends but still doesn’t fully grasp their significance. Or they may be well-versed in these terms and itching to buy electronics or toys with crypto, or to invest in digital currencies. Or they may have zero interest in cryptocurrencies.

No matter the situation, as part of good parenting, it’s your job to help your children understand the complexities of the financial world. Although some economists may disagree on the longevity of cryptocurrency, it’s likely to be around for years to come, and some experts believe that it may overtake spending with cash and credit cards within five to 10 years. Crypto may be generating a lot of interest from your child.

“Teaching about money [almost] starts at birth,” explains Joyce Serido, associate professor and extension specialist of family social science at the University of Minnesota, who specializes in financial parenting. If children have received a solid foundation on how money and currency translate into value and buying power, then they’re on their way to understanding crypto. It’s around the preteen years, she adds, that children may amp up their requests about crypto and feel that they are ready to use it.

The resident crypto expert at the University of Minnesota’s Carlson School of Management, accounting professor Vivian Fang, notes that she’s years off from teaching her five-year-old son about crypto. Until then, she’s schooling him in the value of money through lessons in earning and losing and working for money.

In addition to a weekly allowance of $5, Fang pays her son in quarters for completed tasks, such as one quarter for helping with the dishes and two quarters for assisting in dog walking. He can also incur losses in the form of a fine issued by his parents, if, for example, he misbehaves at a swimming lesson. Fang has witnessed what a discerning shopper her son has become. Working from the idea of using his own money, her youngster will either make a purchase or walk away after deciding an item is “too expensive.” In a few years, he’ll probably also take on a keen interest in crypto, as are millions of older kids now.

Let’s say your child is ready to jump into crypto. You can help your kid research the topic by checking out reputable sources, such as Investopedia, which explains in clear terms what cryptocurrency is and the potential risks and benefits. Also, review together social media sites, like YouTube, which is filled with tutorial videos.

Many kids are drawn to TikTok, so don’t leave that out, because it can be a teaching opportunity to review its crypto videos together. The site features many videos, with some from disreputable influencers who make wild get-rich-quick claims, punctuated with images of Ferraris and Rolls-Royces parked in front of sleek homes. By looking into various types of information, you are helping your child separate reliable information from potential cons 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 fiat, traditional currencies, such as U.S. dollars and Mexican pesos, as investments, and to pay for everyday goods and experiences. As of March 3, 2022, there are more than 17,900 digital currencies with a combined market capitalization of $1.8 trillion, according to CoinMarketCap. The largest by far is Bitcoin (BTCUSD), released in January 2009 by the likely pseudonymous Satoshi Nakamoto and currently worth more than $42,000 per digital coin.

The early digital products were easy to replicate, which was an inherent challenge to digital currencies until Bitcoin was introduced with safety measures in place. Now the use of cryptography and blockchain technology ensures that cryptocurrencies are nearly 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 renders them theoretically immune to government interference or manipulation. While some crypto investing requires the trader to be at least 18 years old, others have no age limit. Even with an age requirement, you can also invest for your underage children until they turn 18.

Here’s What Else to Tell Your Child About Crypto: 6 Tips

1. Growing popularity. Cryptocurrency is like fiat or traditional currency because you can use it to buy 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 through gift cards purchased through platforms like Bitrefill. Among those retailers that accept crypto are Starbucks Corporation (SBUX), Live Nation Entertainment, Inc.’s (LYV) Ticketmaster.com, Best Buy Co., Inc. (BBY), Target Corporation (TGT), Burger King, and Yum! Brands, Inc. (YUM, parent of KFC, Taco Bell, and Pizza Hut).
2. Setup. You must create a crypto account where your funds are stored. You can do that through Coinbase, which is a cryptocurrency exchange that offers many currencies and payment methods. You buy crypto with traditional currency using debit cards or bank accounts.
3. Accessibility. Crypto funds are always available any place in the world because they aren’t tied to a bank or a government.
4. Security. Cryptocurrency can be safer to use because you don’t need to provide personal information to a vendor, lessening the chances of identity theft or fraud.
5. Ups and downs. Cryptocurrency is volatile, which can be good or bad. Let’s say you have $100 in your crypto account. The value can increase, meaning you have more in your account. However, if it dips in value—to $25, for example—there’s nothing you can do to recover the lost funds but wait it out, hoping that the value will increase. It may not.
6. Not a video game. While the games Roblox and Fortnite use virtual currencies called Robux and V-Bucks, respectively, they are fantasies that hold no monetary value in the real world. When playing, you can lose Robux, but you do not lose real money. Investments in actual cryptocurrency, on the other hand, can generate real and often big losses.

The Bottom Line

Given the likelihood that cryptocurrency will have a continued and perhaps a growing impact on the world economy, it may be an important element to consider when it comes to your children’s financial education. In addition to helping your kids track down reputable information, it’s important to be upfront with them about the risky nature of cryptocurrency investing.