Part 1: What is Crypto, How Cryptocurrencies Work, How to Use Crypto
Part 2: Pros & Cons of Crypto Investment, Should You Invest in Cryptocurrencies
Introduction to Cryptocurrency & Crypto Investing for Kids and Teens
This video explains the concept of a cryptocurrency in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about crypto investing, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.
Suitable for students from grade levels:
- Kindergarten
- Elementary School
- Middle School
- High School
The topics covered are:
- What is cryptocurrency
- How do cryptocurrencies work
- How do you use crypto
- What are the advantages of investing in cryptocurrencies
- Are there any disadvantages of crypto investment
- Should you invest in crypto
What is cryptocurrency?
Cryptocurrency or crypto is a type of digital or virtual currency that can be bought or sold on a decentralized network called blockchain. What that means is that cryptocurrency is electronic or virtual money that doesn’t exist in physical form like paper money or coins.
Unlike traditional currencies – like the US Dollar or the Euro – that are issued by governments, cryptocurrencies aren’t issued by any one entity like a government, central bank or corporation.
The blockchain technology used is like a public ledger that keeps track of who owns what by digitally recording all cryptocurrency transactions.
Bitcoin, created in 2009, was the first – and still the most popular – cryptocurrency. Many others – like Ether or Ethereum, Dogecoin, etc. – have been created since then.
How do cryptocurrencies work?
There are two ways to get cryptocurrency: mining and buying.
Mining uses powerful computers to solve complex mathematical problems, which give a reward in the form of cryptocurrency.
The alternative is much easier: it’s possible to buy cryptocurrency through various online exchanges, like Coinbase, by exchanging traditional currencies like dollars for cryptocurrencies like Bitcoin.
If someone wants to sell crypto, it’s also quite simple and can be done through the same online exchanges. Just remember, trading crypto usually involves fees.
How do I use crypto?
Although the vast majority of crypto is used as an investment to earn a profit, some stores and online platforms now accept certain cryptocurrencies as payment.
However, it’s important to note that you must create a digital wallet to store and access your crypto.
What are the advantages of investing in cryptocurrencies?
Cryptocurrency prices are very volatile, meaning that they increase or decrease in value very quickly. This presents opportunities for skilled investors to earn high profits through day trading or long term investment in cryptocurrencies.
Since there are no third parties like banks involved, crypto transfers are easier and faster.
They can also help diversify your portfolio and hedge against inflation as they are not directly impacted by traditional market fluctuations.
Every single transaction is recorded using encryption on the blockchain and available for anyone to see, giving them a level of transparency that makes them very secure.
Are there any disadvantages of crypto investment?
Their volatility is also a huge negative since individual investors can lose a huge amount of money very quickly.
In addition, while crypto itself is secured through encryption, crypto fraud is quite common and billions of dollars have been lost to crypto scams and hacks.
Since the market is largely unregulated, it’s possible to lose all your crypto if someone steals your digital wallet’s key.
Also, there is a significant environmental impact of crypto investment due to the high energy requirements of blockchain technology. For instance, mining popular currencies can sometimes require as much energy as entire countries!
Crypto transactions are irreversible – if you lose your key or send crypto to an incorrect address, you cannot retrieve it.
Crypto doesn’t have any regulatory protections like FDIC insurance. Also, since it’s still quite new and regulations are still evolving, any regulatory changes and crackdowns can have a significant impact on Crypto’s future.
Should I invest in Cryptocurrencies?
Although some experienced traders might be able to profit from crypto investing, it’s just far too risky to be a good choice for individual investors like you and me.
The chance of losing a significant amount of money is just too high to make it worth it, alongside the other disadvantages.
If you want a good high-return investment, a far better choice is to invest in stocks through a broad based index fund – like one that tracks the S&P 500. This way, you can get guaranteed high returns over the long term while not having the incredibly high risks involved with crypto investment.
If you still want to invest in crypto, make sure it’s not more than 10% of your portfolio. It’s best to have other traditional investments like stocks and bonds before dipping your toes in crypto.
Even after all this, you should be prepared to lose your entire crypto investment!