Bitcoin

Crypto For Kids: What You Need to Know

With the rise of trading apps, young people are starting their investment journey much earlier than previous generations. simple user interfaces and gamified features are an engaging and familiar path for digital native generations. it’s quite a different experience from the days when you had to call a stockbroker to make a trade (and pay a commission!). And that’s a good thing!

The combination of more accessible tools, the adulation of the media about every dip and rally the stock market has to offer, and the frenzied rise of cryptocurrencies has created a great deal of interest among people under the age of 18 to seek the opportunity to start investing. now and get the benefits of a longer compounding period.

Reading: Bitcoin for kids

The good news: Parents can open custodial accounts for their children. their children own the assets, but the account is managed by the parent (a common custodial account is ugma, which is offered by earlybird through our app).

The bad news: Unless you’re exclusively interested in stocks, bonds, and funds, finding an indirect way to own crypto can be quite tricky if you’re a child or parent interested in buying crypto on behalf of your child.

translation: if children want to invest in cryptocurrencies, an adult has to help them.

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earlybird is solving this problem.

See also: Bitcoin circulation reaches 19M milestone

We recently announced the waiting list for early crypto – the easiest way to open a crypto wallet for your child. This launch is brought about through our partnership with Gemini, one of the largest and most secure crypto exchanges in the world. If you’d like to join the waiting list, which includes a $25 crypto signup bonus and an 8-part educational email series, you can do so by going to getearlybird.io/crypto.

In a nutshell, parents will be able to open a crypto wallet for their children, set up recurring contributions, and accept gifts from friends and family right into their wallet. It works a lot like our other account type (which lets parents do all of those things, but with stock and bond funds).

why can’t children buy cryptocurrencies?

As an adult, when you head to a cryptocurrency exchange to convert a few dollars into crypto, you create an account, provide information, transfer funds, and boom! you are ready to buy cryptocurrencies. but when it comes to children, this option is not available. To comply with KYC laws, all reputable exchanges in the United States require users to be at least 18 years old. (For the record, kids can’t buy their own stocks without a parent’s support, either.)

“Know Your Customer” laws are regulatory protections enforced by security against fraud and money laundering. when you open an account at a bank, you have to give them your social security number. the same when you open an account with any legitimate crypto exchange (like gemini and coinbase). And the same with early risers… it’s just the rules of the game.

Giving crypto to kids can be tricky (or easy)

Your first solution is to buy cryptocurrencies (such as bitcoin or ethereum) and then store them in a “cold wallet”. Before we continue, here’s a quick introduction to wallets…

a cryptographic “wallet” is an interface to the blockchain. wallets create addresses to which cryptocurrency can be sent and secret keys, which allow you to send your cryptocurrency elsewhere. wallets are either hot (meaning always connected to the internet) or cold (meaning only occasionally connected to the internet). being “offline” makes cold wallets slightly less convenient than hot wallets, but the trade-off is that they are more secure, basically impenetrable to web-based attacks. cold wallets look like fancy usb sticks (it’s literally a piece of hardware). and get this: you can lose that device, but as long as you remember your seed phrase, you can get your crypto back.

and just to close the circle here… a “seed phrase” is a mnemonic device that is connected to your wallet. the seed phrase generates your private key which gives you the ability to send your crypto elsewhere and is basically a “backup” if you ever lose your cold (or hot) wallet. the phrase itself is usually a combination of 12 (sometimes 24) words drawn from a group of 2048 words. How secure is a seed phrase? well, if you do the math, you’ll quickly realize that it would take someone like 1000 years to guess your opening sentence. it’s much easier for them to just trick you into telling them. so the general rule is: never tell anyone your opening sentence.

See also: I bought Bitcoin from PayPal. Here’s what happened | ZDNet

When your child turns 18, they will be able to set up their own wallet, transfer the crypto you bought for them, and withdraw money or keep the crypto in the new wallet. This type of transaction would not be exempt from tax consequences and also requires the child (or parent) to be very careful to keep track of the initial phrase of the wallet; otherwise there is a risk that the little piece of metal will go astray and the crypto is gone forever.

Fortunately, there is a simpler option that doesn’t skimp on security, makes it easy to set up recurring investments, and simplifies the process of receiving financial gifts in crypto (for example, from a birthday or baby shower). Through our partnership with Gemini, the industry-leading crypto exchange, we have made it easy for parents to invest in crypto, currently limited to bitcoin and ethereum, on behalf of their children. sign up for earlybird crypto today.

there are a lot of crypto-curious parents out there

I wish they knew more and are wondering if they should add cryptocurrency to their kids’ wallets (or their own). we think it’s worth adding (in moderation) for three reasons:

first, regarding the performance of bitcoin and ethereum, two things are certain: (1) their prices are highly volatile (prices rise and fall unexpectedly and in large swings); and (2) anyone who has had these assets for more than 3 years has earned money. so if your child has an investment time horizon of more than 3 years, cryptocurrencies have a pretty good track record of rewarding patience and persistence.

Secondly, the future is uncertain, but it is clear that new economies and opportunities are emerging around the crypto space. We are not definitively saying that this or that will happen, but there is a possibility that cryptocurrencies will play a much bigger role in the future. An investment in cryptocurrencies is a bet that cryptocurrencies and cryptocurrency ecosystems will not disappear (and thus far, bitcoin and ethereum have been fairly resilient in the face of hackers, regulation, and media criticism).

And lastly, when it comes to personal finance, education and exposure go hand in hand. dipping a toe is a great way to start a learning journey. we have a great introductory series on the history, performance, technology, challenges and culture of cryptocurrencies for people who sign up.{{cta-custom}}

See also: Russia-Ukraine crisis burnishes gold’s safe-haven shine as Bitcoin lags

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