How to Teach Your Child About Cryptocurrency

How to Introduce Cryptocurrency to Your Child

Your youngster may have heard the phrases cryptocurrency or Bitcoin, watched dazzling cryptocurrency videos on TikTok, or discussed the topic with peers, but he or she may not completely comprehend their meaning. 

Alternatively, they may be well-versed in these topics and eager to purchase gadgets or toys with cryptocurrency or invest in digital currencies. Or they might be completely uninterested in cryptocurrency.

It is your responsibility as a decent parent to assist your children to comprehend the complexity of the financial world, regardless of the scenario. Understanding bitcoin may be incredibly crucial for youngsters, especially when younger generations integrate cryptocurrency into their retirement planning (according to the 2022 Investopedia Financial Literacy Survey). 

And, while some economists differ on cryptocurrency's long-term viability, it's expected to be around for a long time, with some experts predicting that it would eclipse cash and credit card spending within five to ten years. Your youngster may be very interested in cryptocurrency.

Important Points to Remember

It is your responsibility to assist your children to comprehend the complexity of the financial world, and cryptocurrencies may pique their attention.

You may assist your kid in their research by reviewing both credible and untrustworthy sources, emphasizing how to distinguish reliable information from possible drawbacks.

It's critical to explain to your children that bitcoin might lose value over time, making it a dangerous investment.

Joyce Serido, associate professor and extension specialist in family social science at the University of Minnesota, who specializes in financial parenting, says that "teaching about money [nearly] starts at birth." Children will be on their way to comprehending crypto if they have a basic concept of how money and currencies convert into value and purchasing power. She says that during the teenage years, youngsters may get more interested in crypto and believe they are ready to utilize it.

Accounting professor Vivian Fang, a resident crypto specialist at the University of Minnesota's Carlson School of Management, says she's still a long way from educating her five-year-old son about crypto. Until then, she's teaching him the importance of money by teaching him how to earn, lose, and work for money.

Fang pays her son 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 at a swimming session, for example, he may face financial damages in the form of a fine from his parents. Fang has seen her kid develop into a keen shopper. 

Her son will either make a purchase or walk away after thinking an item is "too pricey," based on the notion of utilizing his own money. In a few years, he'll undoubtedly develop a strong interest in cryptocurrency, just like millions of older children do now.

Let's imagine your youngster is ready to dive into the world of cryptocurrency. You may assist your child with their study by using credible sources such as Investopedia, which explains what cryptocurrency is and the possible dangers and rewards in plain English. Also, go through social media sites with your group, such as YouTube, which has a lot of training videos.

Many children are captivated by TikTok, so don't overlook it as a teaching chance to go through the app's crypto videos together. Many videos are included on the site, including some from shady influencers who make outrageous get-rich-quick claims, and photographs of Ferraris and Rolls-Royces parked in front of opulent residences. 

You are assisting your youngster in separating credible information from potential scams and becoming a wiser consumer by investigating numerous forms of information.

What Exactly Is Crypto?

A cryptocurrency is decentralized digital money whose security is provided by cryptography. Help your youngster realize that crypto may be used as an investment and to pay for everyday products and experiences much like fiat, traditional currencies like US dollars, and Mexican pesos. 

According to CoinMarketCap, there are over 18,847 digital currencies with a total market valuation of $1.95 trillion as of April 12, 2022. By far the most valuable is Bitcoin (BTCUSD), which was created in January 2009 by the probable pseudonymous Satoshi Nakamoto and is currently valued at more than $40,000 per digital unit as of April 12, 2022.

Early digital items were simple to copy, which was a problem for digital currency until Bitcoin was launched with security features. Despite being digital, cryptocurrencies are now practically difficult to counterfeit or double-spend thanks to the use of cryptography and blockchain technology.

Blockchain is a distributed ledger that is maintained by a diverse network of computers. Cryptocurrencies are not issued by a central body, making them potentially impervious to government intervention or manipulation. 

Some crypto investments require that the trader be at least 18 years old, while others do not. Even if there is an age limit, you can invest for your minor children until they reach 18.

What Else Should You Tell Your Child About Crypto?

Popularity is increasing. Cryptocurrency is similar to fiat or traditional currency in that it may be used to purchase goods and services; however, it is distinct in that it is only available digitally. Gift cards purchased through services like 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. is among the shops that take cryptocurrency (YUM, parent of KFC, Taco Bell, and Pizza Hut).

Setup. You'll need to open a crypto account to hold your cash. Coinbase, a cryptocurrency exchange with a wide range of currencies and payment methods, is a good place to start. Traditional cash, such as debit cards or bank accounts, is used to purchase cryptocurrency.

Accessibility. Because crypto money is not connected to a bank or a government, they are always available wherever in the globe.

Security. Because you don't have to submit personal information to a merchant while using cryptocurrency, the risk of identity theft or fraud is reduced.

There are ups and downs. Cryptocurrency is volatile, which may be advantageous or disadvantageous. Assume you have $100 in your cryptocurrency wallet. The value of your account may rise, indicating that you now have more money in your account. 

If the value drops to $25, for example, there's nothing you can do but wait it out in the hopes that the value would rise. It might not be the case.

This isn't a video game. While the games Roblox and Fortnite employ virtual currency called Robux and V-Bucks, they are just that: imaginations with no real-world monetary worth. 

You can lose Robux while playing, but you will not lose actual money. Actual bitcoin investments, on the other hand, might result in significant losses.

What is a blockchain, and how does it work?

A blockchain is a decentralized database that is shared across computer network nodes. A blockchain acts as a database, storing information in a digital format. 

Blockchains are well recognized for their critical function in keeping a secure and decentralized record of transactions in cryptocurrency systems like Bitcoin. 

The blockchain's novelty is that it ensures the accuracy and security of a data record while also generating trust without the requirement for a trusted third party.

The structure of the data on a blockchain differs from that of a traditional database. A blockchain organizes data into groupings called blocks, each of which contains a collection of data. 

Blocks have specific storage capabilities, and when they're full, they're closed and connected to the preceding block, producing a data chain known as the blockchain. 

All additional information added after that newly added block is compiled into a new block, which is then added to the chain after it is filled.

A database organizes data into tables, but a blockchain organizes data into chunks (blocks) that are linked together, as the name suggests. 

When implemented in a decentralized manner, this data structure creates an irreversible data timeline. When a block is filled, it becomes permanent and part of the timeline. When each block is added to the chain, it is given a specific timestamp.

What exactly is Bitcoin?

Bitcoin is a decentralized digital money that was first introduced in January of 2009. It is based on concepts presented in a white paper by Satoshi Nakamoto, a mysterious and pseudonymous figure. The identity of the individual or people behind the technology is still unknown. 

Bitcoin promises reduced transaction costs than existing online payment methods, and it is run by a decentralized authority, unlike government-issued currencies.

Bitcoin is classified as a cryptocurrency since it is protected by encryption. There are no real bitcoins; instead, balances are recorded on a public ledger that everyone can see (although each record is encrypted). 

A large amount of computational power is used to verify all Bitcoin transactions, a process known as "mining." Bitcoin is neither issued or backed by any banks or governments, and a single bitcoin has no monetary value. 

Despite the fact that Bitcoin is not legal cash in most areas of the globe, it is extremely popular and has sparked the creation of hundreds of rival cryptocurrencies known as altcoins.

What is Bitcoin mining and how does it work?

The process of putting new bitcoins into circulation is known as bitcoin mining. It's also how the network certifies new transactions, and it's an important part of the blockchain's upkeep and development. 

"Mining" is done with high-tech apparatus that solves a very difficult computational arithmetic problem. The process is restarted when the first machine solves the puzzle and obtains the next block of bitcoins.

Cryptocurrency mining is time-consuming, expensive, and only seldom profitable. Mining, on the other hand, has a magnetic attraction for many cryptocurrency investors since miners are rewarded with crypto tokens in exchange for their efforts. 

This might be because, like California gold prospectors in 1849, entrepreneurs perceive mining as a gift from above. Why not do that if you are technologically inclined?

What is a distributed ledger, and how does it work?

A distributed ledger is a database that is shared and synced by a group of individuals across many sites, institutions, or countries. It enables for public "witnesses" to be present during transactions. 

Each network node's member has access to the recordings shared throughout the network and can possess an identical copy of them. In a couple of seconds or minutes, any modifications or additions to the ledger are reflected and replicated to all participants.

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

The technology that underpins distributed ledgers is the same as that which underpins blockchain, which is the same technology that underpins bitcoin. Bitcoin uses a distributed ledger called blockchain.

What is a digital wallet, and how does it work?

A digital wallet (also known as an e-wallet) is a software-based system that securely maintains the payment information and passwords of users for a variety of payment methods and websites. 

With near-field communications technology and a digital wallet, customers may make transactions fast and simply. They can also generate more secure passwords without having to worry about remembering them afterwards.

Mobile payment systems, which allow users to pay for products using their cell phones, can be used in conjunction with digital wallets. Loyalty card information and digital coupons can also be stored in a digital wallet.

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