How to Teach Your Child About Cryptocurrency

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How to Teach Your Child About Cryptocurrency

Your youngster may have heard the phrases cryptocurrency or Bitcoin, watched dazzling cryptocurrency videos on TikTok, or discussed the issue with peers, but he or she may not completely comprehend their relevance. Or kids may be well-versed in these topics and eager to use crypto to purchase gadgets or toys, or to invest in digital currency. Alternatively, they may have no interest in cryptocurrency.

Whatever the circumstances, it is your responsibility as a parent to assist your children comprehend the complexity of the financial world. Understanding bitcoin may be incredibly crucial for youngsters, with younger generations integrating cryptocurrency into their retirement planning (according to the 2022 Investopedia Financial Literacy Survey). And, although some economists differ on the endurance of bitcoin, it’s expected to be there for years to come, and other experts anticipate it will eclipse cash and credit card spending over the next five to ten years. Your youngster may be very interested in cryptocurrency.

Key Takeaways

  • It is your responsibility to assist your children comprehend the complexity of the financial world, and cryptocurrencies may pique their attention.
  • You may assist your youngster in researching the issue by reviewing both credible and untrustworthy sources, concentrating on how to distinguish between genuine facts and possible cons.
  • It’s critical to explain to your children that cryptocurrency might lose value, making it hazardous to hold.

“Teaching about money [nearly] begins at birth,” says Joyce Serido, associate professor and extension specialist of family social science at the University of Minnesota and a financial parenting expert. If youngsters have a firm concept of how money and currencies convert into value and purchasing power, they are well on their way to comprehending crypto. She says that during the teenage years, youngsters may increase their demands for cryptocurrency and believe they are ready to utilize it.

Accounting professor Vivian Fang, the resident crypto specialist at the University of Minnesota’s Carlson School of Management, comments that she is years away from educating her five-year-old son about crypto. Until then, she’s teaching him the importance of money by teaching him about earning, losing, and working for money.

Fang pays her kid with quarters for performed activities, such as one quarter for helping with the dishes and two quarters for assistance with dog walking, in addition to a weekly stipend of $5. If he misbehaves during a swimming class, for example, he may suffer losses in the form of a fine imposed by his parents. Fang has observed her son’s transformation into a savvy shopper. Based on the notion of spending his own money, her child will either make a purchase or walk away if an item is “too pricey.” In a few years, he’ll undoubtedly develop a strong interest in cryptocurrency, as do millions of older children now.

Assume your youngster is ready to dive into the world of cryptocurrency. You may assist your child in researching the issue by visiting credible websites such as Investopedia, which explains what bitcoin is and the possible dangers and rewards in simple words. Also, go through social media sites like YouTube, which is full of instructional videos, with your group.

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Many youngsters are captivated to TikTok, so don’t overlook it as an educational chance to go through its bitcoin films together. The site has several videos, some of which are from dubious influencers who make outrageous get-rich-quick promises, interspersed with photos of Ferraris and Rolls-Royces parked in front of opulent residences. By investigating diverse sorts of information, you are assisting your youngster in distinguishing between legitimate information and possible scams and becoming a more savvy consumer.

What Is Crypto?

A cryptocurrency is a decentralized digital money that is secured by encryption. Help your youngster realize that cryptocurrency, like fiat, conventional currencies such as US dollars and Mexican pesos, may be used as an investment as well as to pay for daily products and activities. According to CoinMarketCap, there are more than 18,847 digital currencies with a total market valuation of $1.95 trillion as of April 12, 2022. The biggest by far is Bitcoin (BTCUSD), which was published in January 2009 by the probable pseudonymous Satoshi Nakamoto and is now valued more than $40,000 per digital unit as of April 12, 2022.

Early digital items were simple to copy, which posed a barrier to digital currencies until Bitcoin was developed with safeguards in place. Despite being digital, the use of encryption and blockchain technology assures that cryptocurrencies are almost hard to counterfeit or double-spend.

Blockchain is essentially a distributed ledger supported by a diverse network of computers. Because cryptocurrencies are not issued by a central authority, they are theoretically immune to government meddling or manipulation. While some crypto investments demand that the trader be at least 18 years old, others do not. Even if there is an age limit, you may invest for your minor children until they reach the age of 18.

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

  1. Popularity is increasing. Cryptocurrency is similar to fiat or conventional money in that it may be used to purchase goods and services; however, it differs in that it is exclusively digital. Gift cards bought via sites such as Bitrefill are one of the simplest methods to spend bitcoin at merchants and providers. 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. are among the shops that take cryptocurrency (YUM, parent of KFC, Taco Bell, and Pizza Hut).
  2. Setup. You must open a cryptocurrency account to keep your money. You may do so using Coinbase, a cryptocurrency exchange that supports a wide range of currencies and payment methods. You purchase cryptocurrency with regular money using debit cards or bank accounts.
  3. Accessibility. Because crypto money are not connected to a bank or a government, they are always accessible wherever in the globe.
  4. Security. Because you do not need to submit personal information to a seller while using cryptocurrency, the risk of identity theft or fraud is reduced.
  5. There are ups and downs. The volatility of cryptocurrency might be positive or detrimental. Assume you have $100 in your cryptocurrency account. The value may rise, indicating that you have more money in your account. However, if its value falls below $25, for example, there is little you can do to recoup the lost monies other than wait it out and hope the value rises. It might not.
  6. It’s not a video game. While the games Roblox and Fortnite employ virtual currency called Robux and V-Bucks, they are purely fictitious and have no monetary value in the real world. When you play, you may lose Robux but not actual money. Actual bitcoin investments, on the other hand, may result in real and frequently significant losses.
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What is a blockchain?

A blockchain is a distributed database that is shared across computer network nodes. A blockchain, like a database, saves information electronically in digital format. Blockchains are well recognized for playing an important part in cryptocurrency systems such as Bitcoin in preserving a secure and decentralized record of transactions. The blockchain’s novelty is that it ensures the accuracy and security of a data record and produces trust without the requirement for a trusted third party.

The way data is organized differs significantly between a traditional database and a blockchain. A blockchain accumulates information in groupings known as blocks, which store sets of data. When a block’s storage capacity is reached, it is closed and connected to the previous full block, producing a data chain known as the blockchain. All new information that follows that newly added block is assembled into a newly formed block, which is then added to the chain once it is complete.

A database typically organizes its data into tables, but a blockchain, as the name suggests, organizes its data into pieces (blocks) that are connected together. When implemented decentralizedly, this data structure creates an irreversible temporal line of data. When a block is full, it gets imprinted in stone and becomes a part of this timeline. When a block is added to the chain, it is given a specific time stamp.

What is Bitcoin?

Bitcoin is a decentralized digital money that was established in January 2009. It is based on the principles presented in a white paper by the enigmatic and pseudonymous Satoshi Nakamoto. The name of the individual or people who invented the technique is still unknown. Bitcoin promises reduced transaction costs than standard online payment channels and, unlike government-issued currencies, is run by a decentralized authority.

Bitcoin is classified as a cryptocurrency since it is protected by encryption. There are no real bitcoins; rather balances are recorded on a public ledger that everyone can see (although each record is encrypted).A large amount of computational power is needed to verify all Bitcoin transactions, a process known as “mining.” Bitcoin is neither issued or guaranteed by any banks or governments, nor is it valued as a commodity. Despite the fact that it is not legal cash in most areas of the globe, Bitcoin is very popular and has sparked the creation of hundreds of alternative cryptocurrencies known as altcoins.

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How Do Bitcoin and crypto mining work?

Bitcoin mining is the method through which new bitcoins reach the market. It is also how the network certifies new transactions and is an important part of the blockchain ledger’s upkeep and growth. “Mining” is done using powerful hardware to tackle a very challenging computational arithmetic issue. The first computer to solve the puzzle obtains the next block of bitcoins, and the process is restarted.

Mining cryptocurrency is time-consuming, expensive, and only seldom profitable. Nonetheless, mining has a strong allure for many cryptocurrency investors due to the fact that miners are compensated with crypto tokens for their efforts. This might be because, like California gold prospectors in 1849, entrepreneurs saw mining as pennies from heaven. And why not, if you are technologically inclined?

What is a distribued ledger?

A distributed ledger is a database that is shared and synced by several persons across various locations, organizations, or countries. It enables for public “witnesses” to be present during transactions. Each network member has access to and owns an identical copy of the recordings shared throughout the network. Any modifications or additions made to the ledger are immediately reflected and duplicated to all participants.

A distributed ledger differs from a centralized ledger, which is the kind of ledger used by the majority of businesses. Because it is a single point of failure, a centralizedledger is more vulnerable to cyber-attacks and fraud.

The technology that underpins distributed ledgers is the same technology that underpins blockchain, which is the technology that underpins bitcoin. Blockchain is a sort of distributed ledger that bitcoin employs.

What is a digital wallet?

A digital wallet (also known as an e-wallet) is a software-based system that securely saves users’ payment information and passwords for a variety of payment methods and websites. Users may utilize near-field communications technology to complete purchases effortlessly and fast by utilizing a digital wallet. They can also generate tougher passwords without having to worry about remembering them afterwards.

Mobile payment systems, which enable users to pay for products using their cellphones, may be used in combination with digital wallets. A digital wallet may also be used to store information from loyalty cards and digital coupons.

The Bottom Line

Given the potential that bitcoin will continue to have a positive and perhaps expanding influence on the global economy, it may be an essential factor to consider when it comes to your children’s financial education. In addition to assisting your children in locating credible information, it is critical to warn them about the dangerous nature of bitcoin investment.

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