Due to the recent boom in cryptocurrencies, people are now investing in them to secure the financial future of their children. Thus, it is essential to make children understand the role money plays in life. You can go further by explaining the different ways to increase the money they possess, one of which is by investing in cryptocurrency.

As it can be quite difficult to explain such a complex currency to young kids, we have created a guide for you to refer to when explaining it to your children.  

What is cryptocurrency?

Cryptocurrency uses digital files as money. It creates these files using cryptography and uses digital signatures to keep the transactions secure.

Who invented cryptocurrency?

This question is yet to be answered. In October 2008, a group known as Satoshi Nakamoto publicized the working of a new form of currency, called Bitcoin. However, no one knows the real identity of the people behind the group. 

How does cryptocurrency work?

Unlike traditional currency, a single person or body does not control cryptocurrency. Instead, it is controlled through a distributed ledger that serves as a financial transaction database. This database is usually a blockchain. 

How many cryptocurrencies are there?

Bitcoin was the first cryptocurrency, and was originally released as open-source in 2009. Since then, developers have created several thousand cryptocurrencies, as it is quite easy to do so at any time. 

The Value of a cryptocurrency

The initial value of the currency comes from the time and resources it takes to mine it. A miner puts in brainpower, time and money into mining cryptocurrencies against hundreds of other people all over the world. Hence, he will not give it away for free. Instead, he uses mined coins to buy traditional currency as well as goods. These exchanges allowed individuals outside the mining circle to get their hands on the currency, thus, creating a large network of buyers of cryptocurrency.

How does cryptocurrency have real-world value?

Cryptocurrencies are like trading cards, whose value increases when more people begin to use them. Furthermore, cryptocurrencies become more valuable the longer you hold on to them. However, Bitcoin and other cryptocurrencies can be used to purchase goods, items and services as it is a universal currency, unlike trading cards.

It is akin to gold. As long as people trust that the value of the currency, they will continue to invest in it. Additionally, no corrupt government organization can take control of your cryptocurrency assets. Thus, making people believe in it more.

Advantages of purchasing cryptocurrencies

• Paper currency is present in large quantities. However, the number of bitcoins, unlike paper currency will never be more that 21 million. An estimated 3.7 million bitcoins are lost. Thus, only 17.3 million bitcoins are in circulation at any given time.
• Cryptocurrencies are highly accessible and versatile. It only takes a few moments to transfer the currency from one account to another, and thus, can be used to purchase goods and services. Therefore, several firms and companies opt to use cryptocurrency for transactions. Thus, financial programs have begun to show the prices of Bitcoins along with those of gold and stocks. 
• The blockchain technology used in Bitcoin and other cryptocurrencies is secure and decentralized. Conducting transactions via Bitcoin allows the user to bypass bank fees and other financial payments. Bitcoin was valued at $975.70 when it started, but now it is $64,000.
•  You can also sell bitcoins easily. 

Disadvantages of buying cryptocurrencies

• The Bitcoin surge may not be as much in the next 5 years. With new cryptocurrencies created so frequently, the demand for bitcoins may eventually reduce. Furthermore, new cryptocurrencies have more utility than Bitcoin. This creat more demand for a competitor cryptocurrency. 
• As cryptocurrencies are decentralized, Users are not offered legal protection which makes them susceptible to scams. 
• Additionally, due to no decentralization, there is no assured minimum valuation. Thus, if a large company decides to not use cryptocurrencies, then its value could decrease rapidly.
• A big disadvantage is that the uncertainty that accompanies cryptocurrencies. There is always a looming threat that the government could ban cryptocurrencies. 

How to teach kids about cryptocurrency? 

Now that you have learnt the basics, it is time to encourage your kids to explore the world of cryptocurrency on their own. You can start by asking your kids to create their own unique cryptocurrency. Many online platforms allow kids to create their own currency and logo, thus, allowing them to better understand how it works. 

Once they understand how cryptocurrencies work, allow them to invest in it. To do so, follow the steps given below. 

• Find a good broker or crypto exchange
• Then, create an account for your child and verify it
• Then give them some cash to invest
• Purchase the cryptocurrency of your choice and choose a secure storage option.

Benefits of letting your kids invest in cryptocurrency

• Cryptocurrencies train your children to manage their finances when they are young. 
• It teaches them responsibility. Being the owner of your finances can be difficult for cryptocurrencies. When you lose a bank account password or username, you can always regain access. However, the chances of recovery of a lost bitcoin wallet are very slim. 
• Cryptocurrencies help children save money, thus, they can avoid debt in future. With the constantly increasing prices, many individuals are under large debts. If your kids invest in cryptocurrencies, they can be saved from this future. Thus, encourage your kids to save the currency instead of trading it at a low price. 

Final thoughts

Cryptocurrencies are the future of transactions. Therefore, it is quite beneficial for children to learn how to invest in it. Thus, saving money for the future. The above simple introduction to cryptocurrencies enables your children to understand how they work. Hence, enabling them to invest and grow their finances. Additionally, youngsters can read several books, written by experts in the field to learn about bitcoin and other currencies.