Investing in cryptocurrency can be considered controversial, as these digital assets are tied only by a network and a multitude of worldwide users. No government or financial institution controls it, so how safe could it be as an investment for a family? The answer depends on a series of factors.
Many invest in stocks and bonds, which are not entirely safe or efficient despite being regulated on official markets. That’s because factors like demand, inflation, and exchange rates affect their prices, making them volatile. This can also happen to assets like Bitcoin and Ethereum, whose value changes depending on media coverage and supply and demand.
Hence, each type of investment carries a certain level of risk. However, cautious investors know how to minimize their exposure to unregulated markets and high volatility. Still, this takes time and skill, but it might eventually pay off. So, should you do it, as a parent, for your kids?
What Does Long-Term Crypto Investment Imply?
Investing in cryptocurrency for the long term is one of the best strategies to minimize risk and maximize constant earnings. Although low, the extended investment brings a certain level of safety and reassurance, especially through strategies like dollar-cost averaging (DCA).
Expert investors often use DCA. It involves investing the same amount of assets across specific timeframes despite changing prices. This helps even out market volatility and allows investors to adjust their approach based on their risk assessment and experience.
In this case, long-term refers to how long you’re willing to buy crypto and spread it across your portfolio. Ideally, this should take up to a few years until your portfolio is well-established and you only have to make minor adjustments based on market indicators.
What Does Purchasing Crypto For Kids Mean?
If you’re an investor yourself or would like to gift your kids in the future with a significant sum of money, you can start researching available accounts to buy and store it. Choose a reputable currency exchange or broker where you set up an account you need to fund.
You must only manage the account until your kid reaches the legal age to invest. After that, they can decide if they want to withdraw the money or continue investing. This depends on your influence regarding financial literacy or your inclination to work with crypto.
However, you must consider ways to secure the account because if you lose your access key or happen to be involved in a cybersecurity attack, you cannot reclaim the money. Unfortunately, this comes at the cost of decentralization and self-custody wallets.
What Are Your Storage Options?
Investing in crypto allows you to choose between different types of wallets. There are two main types of crypto wallets ―hot and cold. In addition, they also come in categories of custodial and non-custodial, so let’s break them down.
Hot wallets are connected to the internet. They include desktop, mobile, and web wallets and have the benefits of high accessibility and ease of use. However, they’re the most prone to attacks such as DDOS, so users have to enable high-security measures, such as solid anti-virus programs, to protect devices from malware.
Cold wallets can function without the internet. Simple paper can be used as a wallet as you print the QR code from the wallet and keep it safe. Additionally, hardware wallets are cold and come in the shape of a USB you connect to the computer. After you finish the transaction, you only unplug it.
Finally, custodial wallets are those managed by a third party, usually an exchange. While they’re user-friendly and offer recovery options, their privacy option is limited, and they are exposed to hacks. You manage non-custodial wallets only, so they are more private, but you must have some special tech-savvy skills to set them up correctly.
What Should You Invest In?
The cryptocurrency market is vast enough to welcome investors with different outlooks and expectations. Numerous types of coins exist, each with its own use case and future, so it’s impossible not to find something valuable.
Usually, people invest in Bitcoin or Ethereum as they pass the time test on the market. Bitcoin’s circulating supply is driving demand, as it’s getting scarcer by the year, whereas Ethereum has an unlimited coin supply, but its value comes from the blockchain’s use cases.
Other viable options include Tether, Cardano, and USD Coin. If you’re into memes, you could check out Dogecoin or Pepe coin, but if you’re inclined to invest in decentralized applications, Uniswap is a common investment.
How Should You Teach Your Kids About Crypto?
Since you’re creating a crypto account and will manage it until they reach the legal age, you might want to teach them about it. However, they might not express much interest in it, which is fine. After all, we all have different hobbies and inclinations.
Still, ensuring they’re financially literate is considerably essential to ensure their future is safe.
For instance, they will be advantaged if they can invest their crypto money smart by acquiring a vehicle or an apartment (in case you can construct such an extensive portfolio).
Hence, make sure your habits are a good example for them regarding spending or saving up. At the same time, openly discuss money and how it’s handled in the family. Teach them to control money rather than being influenced by it so they can pursue a healthy financial life without constant support or scolding from you as parents.
What Do You Think About A Crypto Account For Your Kids’ Future?
As parents, we don’t know what the future unfolds for us, so we often worry about how our kids will manage life in early adulthood. A savings account might give them a little boost, and you can try creating a crypto investment portfolio that gains value over time. You can allow them access when they’re 18 or older, where they can decide their purpose. Until then, you can invest in crypto and adjust the portfolio to minimize risk and even losses and wins.
