We all know kids learn reading, writing, and arithmetic in school. That’s great and it helps lay a foundation for a successful life. Unfortunately, investment and personal finance are not taught with as much thoroughness as these subjects.
If a parent or someone else in your life taught you about the stock market or how to balance a checkbook when you were a child, chances are that you are better off than those who didn’t learn those things as kids.
In 2021, teaching your child about the stock market is still important but teaching them about the latest fintech trend is probably more important than lessons on balancing a paper checkbook. You want to teach them about the latest and greatest financial opportunities that exist now and give them a sense of what could be available in the future. That’s why it is critical to teach kids about crypto.
If you’re not sure where to start, these lessons will help set your child up for a brighter financial future. Here are five points you can teach your children about cryptocurrency in 2021.
1. What cryptocurrency is
The best place to start when teaching kids about crypto is to explain what cryptocurrency is. That may require you to do a little more research because even people familiar with trading and investing in crypto might not be 100 percent familiar with what cryptocurrency is and how it works.
The more you understand what cryptocurrency is, the better you will be able to break it down to your kids and answer any questions they might have. If you’re not ready to do a deep-dive yourself, here are a few bullet points you should know.
Cryptocurrency is a decentralized digital currency based on blockchain technology. To break that down a little further, decentralized means that the currency is created and housed on a spread-out network of computers and not issued through a single entity, usually that means a national government.
Blockchain technology is a digital ledger of transactions. When cryptocurrency changes hands or is used for a purchase, a digital “block” is created recording that transaction. That block is secure and the data cannot be changed. The result is a chain of records that helps keep crypto more secure than other forms of currency.
2. The history of cryptocurrency
If you want to start at the beginning, you will find that cryptocurrency has a mysterious and interesting beginning.
Cryptocurrency, and more specifically the most well-known form of crypto, Bitcoin, started in 2008 with an academic paper called Bitcoin: A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto and the registering of a web domain named bitcoin.org.
The following year several tech-savvy crypto enthusiasts mined the first Bitcoins and an international phenomenon was born.
Articles about the hunt to find out who Satoshi Nakamoto is read like a good mystery novel. To this day, no one is completely sure if Satoshi Nakamoto is a person actually named Satoshi Nakamoto, someone using that name as an alias, or a group of people who picked that single name to disguise their identities.
After that story, there are plenty more that make up the interesting history of crypto. Make sure you include the tale about the first-ever Bitcoin purchase where a computer programmer paid 10,000 bitcoins for two pizzas from his local Papa Johns, which is roughly $335 million today.
3. How crypto trading works
Once you’ve laid the foundation as to what cryptocurrency is, you can delve deeper into how to interact with the currency in order to make money. As Cove Markets notes in this strategy guide, day trading is one of the best ways to do this.
Day trading involves making short-term transactions of cryptocurrency to turn a quick profit. This is a very popular way of interacting with crypto because of the volatility of the markets.
Teaching kids about day trading strategies can include many different topics. You can start with the basics such as what exchanges to use, how to fund an account, and what security measures to take. From there, you can move on to teaching them about the tools and charts they need to know about to do research and, for more advanced (and slightly older) kids, you can delve into different trading strategies, such as arbitrage.
4. Cryptocurrency is very volatile
When teaching your kids about crypto you should couch all you say with a grain of caution. You don’t want to discourage kids from learning more and ultimately getting involved in cryptocurrencies but youngsters (or any new crypto investor) need to understand the risks.
The crypto market is incredibly volatile. You can buy into a coin or token for just pennies and see it skyrocket up to tens of thousands of dollars in value. However, you can also buy-in at the height of a coin, expecting it to keep going up, and see the value plummet in a very short period of time.
Partially because of this volatility, crypto investing and trading is great for young people with higher risk tolerance. They just need to understand there are big risks.
5. It (may be) the way of the future
The most important reason to teach kids about crypto is that, by the time they are adults and have kids of their own, crypto might be the global standard for currency.
There are several reasons this could be true. Crypto provides better security and more privacy. On the other hand, the volatility makes it hard to spend and governments don’t like that they don’t have control of it.
Whether or not this is the future of money, it is worth teaching kids the basics and letting them determine what they believe will be the long-term future of crypto.
The earlier you teach children about finance so they can become financially literate, the better they will be in the long term. In 2021, crypto is a big piece of the investment landscape and could become the currency of the future. Start them learning about it now and it will pay dividends for them down the road.