Cryptocurrencies for Teens: What Parents Need To Know | doshi

Digital assets continue to grow in popularity, with more and more teens curious about investing in cryptocurrencies.

As parents, it’s useful to know the basics so you can help your teens learn about some of the benefits and risks.

Here's what you need to know about cryptocurrencies and your teen's investment potential:

What are cryptocurrencies?

You've most likely heard of Bitcoin, the first and most well-known cryptocurrency created in 2009. Since then, thousands of other cryptocurrencies have been created. Some of the more popular cryptocurrencies include Ethereum, Tether, and XRP, among many others.Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units.They're not to be confused with in-game virtual currencies, such as V-bucks - the currency for the online game Fortnite. The difference is that these virtual currencies can only be used to make purchases within the game. Cryptocurrencies can be used to make transactions in the same way as government-issued money like US dollars or GB pounds. For example, it's possible to buy a house using some cryptocurrencies. It's not common yet, but it's possible.Cryptocurrencies are decentralized. This means they're not regulated by a bank, government, or other central authority. Blockchain technology ensures that these transactions are recorded correctly and can be made securely.

Are NFTs a cryptocurrency?

No, NFTs are non-fungible tokens. These are digital assets that are unique and unable to be replaced. NFTs can be bought, sold, or traded with cryptocurrencies. They have become more popular because it is a new way to prove digital ownership. For example, an NFT could be used to represent a digital painting. The artist could sell the NFT, and the buyer would own the digital painting. Unlike physical paintings, digital ones can be easily copied. An NFT would prevent replicas because they are like a certificate of ownership that proves that the buyer owns the original copy. This is because NFTs run on blockchain technology, which is secure and cannot be tampered with. This makes NFTs trustable and difficult to copy.Some young people enjoy the exclusivity of owning an NFT. They may also see it as a way to support their favorite artists or creators. For example, if your teen is a fan of a musician, they might buy an NFT that's a digital copy of one of the musician's songs. As NFTs become more popular, we're likely to see more teens buying and selling them.Besides entertainment and speculative purposes, utility NFTs will become common in the near future. This is where an NFT has a practical purpose, such as digital tickets or education certificates. For example, your teen may use an NFT to prove they've completed a Computer Science course.

It’s definitely worth reading our blog on NFTs to find out more about them.

What are the benefits of investing in cryptocurrencies?

Cryptocurrencies offer a number of potential benefits, including:

Decentralization

Cryptocurrencies are not subject to government or financial institution control. This means they offer more autonomy and privacy.

Volatility

This is both a benefit and a risk. The fact that cryptocurrencies can be incredibly volatile means they can offer investors the potential for high returns. It works on the basic investment principle of high risk equals high reward.

24/7 trading

Cryptocurrencies can be traded at any time. They're not subject to traditional market hours. This makes it more flexible to explore options in the evening or on weekends.

What are the risks of investing in cryptocurrencies?

It’s important for you and your teen to know that investing in cryptocurrencies is risky and there are things that you need to watch out for.

Volatility

The very thing that can potentially lead to high returns on your investment is also what makes it risky in the first place. The volatile nature of cryptocurrencies means that prices can fluctuate wildly.

Lack of regulation

Cryptocurrencies are not currently regulated by any government or financial institution. This is something that is expected to change in the near future as more governments are getting involved.

Hacks and scams

As cryptocurrencies bring forward a new ecosystem while having a less regulated environment, scammers and hackers are waiting for opportunities where people make mistakes. That's why it is important to always do your own research (DYOR), check all relevant information received, and never share your private keys with anyone.

How can I help my teen make smart investment choices?

If your teen is interested in investing in cryptocurrencies, there are a few things you can do to help them make smart choices:

Seek professional financial advice

It’s good to do research and find trustworthy info online. But even good information and suggestions do not constitute professional financial advice. You should consult a professional before making any decisions about your investments or helping your teen to start thinking about their own money choices. This is definitely the first step to take.

Get clued up

Educate yourself on the basics of cryptocurrencies and investing. This will help you better understand the risks and potential rewards of investing in this new asset class.

Set limits

Once you’ve got some professional financial advice and better understand the risks involved, work with your teen to help them set limits on how much they're willing to invest. This can help prevent them from losing more money than they're comfortable with.

Diversify

You’ll have heard the saying “don’t put all your eggs in one basket”. Well, that’s particularly apt when it comes to investing. A financial advisor can help you learn how to diversify your teen's investment portfolio. This will mean investing in various assets, including stocks, bonds, and cryptocurrencies. This can help reduce the risk of losses if any one asset class plummets in value.

Choose reputable exchanges

If you decide to purchase cryptocurrencies, choose a reputable exchange. There are many scams and hacks in the cryptocurrency world, so it's important only to use exchanges that have a good reputation.

What is doshi?

doshi is creating a safe space for teens to learn about and explore crypto, with supervision from their parents and without the fear of being scammed. We want to make it easier and safer for young people to get started with cryptocurrencies without all the complexity. Check out the doshi website to learn more and sign up for a free account.

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The information contained in this article is not financial advice and is for general informational purposes only. Please consult your financial, legal, or tax advisor before making any decisions.

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