There is so much to cover on the topic of how cryptocurrency and NFTs, or non-fungible tokens, will affect the next generation of investors that I’m going to devote two articles to it. The second article, focusing on NFTs, will publish in a couple of weeks. This first article focuses on kids and cryptocurrency, specifically how parents can teach and introduce their offspring to the new world of digital assets … their future.
Before I get into if or when you should start to introduce kids and grandkids to crypto and other digital products, I’ll give you some background.
The New World
Your world is only a click away. Your phone and computer connect you to others and to the world in a way that is now the new normal. We stay in touch with friends; we run our businesses; we network with companies; we play games; we watch goofy videos and share them; we buy and sell every product and service imaginable; we pay bills and transfer money; and we buy and sell art and collectibles.
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Smartphones are part of our life. In the U.S., there are 294.2 million (opens in new tab) smartphone users (the number is 6.6 billion globally (opens in new tab)). 85% of American adults use smartphones. And what is interesting is that 47% of U.S. users (opens in new tab) say they couldn’t live without their devices.
Our Next Generation
NPR reports (opens in new tab) that over half of the children in our country own a smartphone by the age of 11. This does not include smartphone use by children whose parents hand over their devices. Younger kids are playing video games, and older teens (opens in new tab) are not only gaming, but are also knee-deep in social media, texting, clicking on YouTube, TikTok and other sites. In fact, EdSource.org (opens in new tab) reported that children 8 years old and younger spend at least 48 minutes per day on a mobile device.
The numbers show us that the digital world is part of the world. Games and social media are one thing to understand, but I think many of the older generations are flummoxed by the thought of digital money and digital art. I recommend that parents try to understand this new world and educate your kids, rather than hide your head in the sand.
Let’s begin with the basics of the evolution of money as a medium of exchange.
Why Money Was Invented
Once upon a time about 10,000 years ago, people lived where they could easily move from place to place to find food. When one group of people met another group, they would sometimes see new things they wanted, which led to bartering among the groups to exchange goods and services.
Bartering quickly got complicated because it became too hard to figure out the value of things. You can only tell the value or worth of something by knowing what people are willing to give you in exchange for what you have or the service you can perform. So people began to use a medium of exchange, or a common measure of value. For instance, if shells were used as a common medium of exchange, the value of everything was measured in shells.
People soon found out that they needed to control the supply of the mediums of exchange to make everything work. Precious metals, like gold and silver, were hard to find and could be controlled by rulers or countries, so these became good mediums of exchange. The value could be stamped on these first coins to let everyone know their value.
Before You Morph into the Digital World
The new digital world is important, but I feel strongly that you need to start your child’s financial education with physical money. Pay little kids in coins and bills when they complete their allowance chores or when you give them money. Then go to the bank and open joint savings and checking accounts with them.
When you get home, show them how their accounts are now online. Their money becomes digital, but they saw that it was real before it became digital. They need to start to understand the difference between “video game money” and real money.
The next step is help kids to learn how they can spend their money with a debit card, which is digital money. This is a great way to put “training wheels” on their first financial vehicle.
The educational process has to continue. I spoke to Johnson Cook, co-founder and president of Greenlight (opens in new tab), a family fintech company. (I’m an adviser to Greenlight.) Cook told me, “We recommend that parents start young…
Read More: How Parents Can Introduce Kids and Cryptocurrency