Even if you haven’t been keeping up with it, chances are you’ve heard all about Bitcoin in the news. It’s posted a meteoric rise in value — and where other cryptocurrencies have fallen flat, Bitcoin has made a lot of individuals consider investing.
Generally speaking, anyone who’s held Bitcoin for more than three years has made money. But before you start investing for the kids in your life, there are a few important things you’ve got to understand about this market-leading crypto and how it works.
Above all else, it’s important to note that Bitcoin is not ideal for every investor. It’s super volatile as an asset class — and that volatility can inevitably cause inexperienced investors to make bad choices. That’s why you’ve got to do your homework and carefully consider the options available to you before you invest in crypto.
This guide will explain what Bitcoin is, how it works, how to explain Bitcoin to kids, and how to buy Bitcoin for children.
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What is Bitcoin?
Before we dive straight into how you can invest in Bitcoin for children, let’s take a step back and talk about what Bitcoin is.
Simply put, Bitcoin is the world's largest cryptocurrency by market capitalization. You’ll sometimes hear people refer to a cryptocurrency as “crypto,” but both terms mean the same thing. Crypto is a digital currency secured by cryptography. This makes it virtually impossible to double-spend or counterfeit, and it exists only online.
That’s how a cryptocurrency like Bitcoin is different from a more traditional currency like US Dollars (USD) or Euros (EUR), which are also called “fiat currencies.”
Fiat currencies are normally backed and controlled by a central bank. But cryptos like Bitcoin aren’t associated with government banks. Instead, Bitcoin is backed by a decentralized ledger system called “blockchain.”
Blockchain operates outside all of the world’s banks and federal agencies, which means it’s theoretically immune to fiscal and monetary policy. Instead, the value of Bitcoin is dictated by supply and demand — which means that a single Bitcoin is priced at whatever the market is willing to pay for it.
Because most mainstream services don’t accept Bitcoin as a supported currency, it’s treated more like an asset than money. Generally speaking, Bitcoin investors use a “buy and hold” strategy. This enables investors to keep their Bitcoin for a long period so that it can increase in value over time — subsequently bolstering a crypto investor’s overall portfolio.
Why do you need to know about Bitcoin?
If you want to invest in a child’s financial future and help them build a nest egg for the future, Bitcoin has rapidly emerged as an attractive asset class.
Even so, it’s important to bear in mind that holding crypto isn’t for the faint of heart. Because crypto coins aren’t regulated (and protected) by central banks, they can be quite volatile — which is to say they can drop in value pretty frequently.
That means there's an element of risk you’ve got to take on when investing in crypto. At one point in 2021, the value of Bitcoin dropped by 30% over the course of a single day.
Volatility can sometimes rattle new investors, pushing them to make poor reactive choices.
But on the flip side, Bitcoin has definitely emerged as the more sustainable crypto investment over recent years compared to the more than 1,000 cryptocurrencies that have launched and folded over the course of the last decade.
In 2015, a single Bitcoin was worth $327 apiece. Fast forward to March 2021, and Bitcoin is now valued at more than $39,000 each, representing an average annual return of almost 94%.
Translation: if you’re in a position to ride out the inevitable volatility that goes hand-in-hand with Bitcoin, you’ll likely be well-rewarded — and nobody’s better at riding out volatility than children with a long investment horizon.
That makes Bitcoin an attractive investment for kids. But it’s also worth considering how you’ll be able to explain that investment and how crypto works to the children in your life.
How to Explain Bitcoin to Children
If you choose to invest in crypto for the children in your life, you can expect that they're going to have some questions about crypto — particularly as they get older.
So, how do you explain Bitcoin to a child?
One way to do it is by giving them a stripped-back version of the definition we’ve already covered — but it’s important to compare and contrast Bitcoin to something they already understand. For example, you can compare Bitcoin to USD.
You can start by explaining to them that Bitcoin is a type of currency that exists only online. That means, unlike US dollar bills you’d get for your weekly allowance, there are no physical bills or coins associated with Bitcoin. It’s 100% digital.
Even though Bitcoin is digital, it can still be used to buy things or swap for other types of money like USD.
It’s also important that you explain to children why people like Bitcoin. You can walk them through decentralization and how that makes spending money more accessible for some people.
For example, if the child you’re chatting with is familiar with the huge protests that happened in Ottawa in early 2022, you can explain to them how the Canadian government froze the financial assets of protestors to keep them from accessing their money. But the government can only block your access to accounts with fiat currencies like Canadian Dollars (CAD).
Because the government doesn’t control Bitcoin, that makes it an uncensorable currency.
People also like Bitcoin because its value has increased by so much over the past few years, making it an attractive way to invest fiat currency.
This is largely because of a supply-and-demand scarcity — which means that a lot of people want to invest in Bitcoin, but there’s only so many coins to go around. Because there’s a finite amount to invest in, the demand for those coins makes them worth more.
Finally, you should try to help the children in your life understand blockchain technology. This is a term that gets tossed around a lot in the news and by fintech companies, but a lot of people don’t understand it.
You can strip everything back and tell kids that the blockchain is like a virtual notebook that records every transaction. But no single person is in charge of the notebook. Many people share it, and nobody can ever erase anything or change anything in the notebook — once a transaction is written down, it’s on the record forever.
This stuff can be tricky to explain to kids. But by starting their education in crypto early, you’ll be boosting their financial literacy and helping them to understand and appreciate your investment way more.
How Do You Buy Bitcoin For Children?
If you want to invest in Bitcoin for children, you’re going to find that it can be a fairly labor-intensive process. Although kids are allowed to own crypto, they can’t buy or sell it. This is because cryptocurrency exchanges require you to be 18 years old to set up a digital wallet — which you need to buy crypto coins yourself.
Fortunately, there are a couple of solutions here — and one of the easiest options is to buy Bitcoin for children through EarlyBird Crypto.
Similar to gifting stock into a child’s UGMA custodial account, EarlyBird Crypto lets you buy Bitcoin or Ethereum for a child by placing it in a custodial crypto wallet.
When you place a Bitcoin investment into that crypto account, the asset is then the child’s legal property. But because they’re under 18, you’re the custodian of those assets.
With full functionality, you will also be able to make recurring or one-off investments to the child’s EarlyBird Crypto account.
A less efficient solution is to buy Bitcoin and then store it in a “cold wallet.” A cold wallet is normally an offline piece of hardware like a USB stick that can be used to store a crypto asset — although it can also take the form of a paper wallet.
After investing in crypto and placing it on a cold wallet, you can then gift that wallet to a child. Then when they turn 18, they can set up a digital wallet, upload the crypto you bought for them, and either cash in or continue to hold the Bitcoin online.
The worry with an offline wallet is that a child will need to take good care of it over several years or risk losing the investment completely. That’s why you may want to consider investing in Bitcoin through EarlyBird Crypto instead.
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Conclusion
If you want to invest in a child’s financial future, Bitcoin has turned out to be an attractive asset class. It’s skyrocketed in value over the years — but it’s important to remember that crypto values can be volatile, so this investment strategy poses some risk.
Even so, if you’re keen to invest in Bitcoin for children, you should definitely consider setting up an EarlyBird account for the children in your life.
So, are you ready to start investing in Bitcoin for children? Download EarlyBird today.
This page contains general information and does not contain financial advice. All investments involve risk. Any hypothetical performance shown is for illustrative purposes only. Actual investment performance may be different for many reasons, including, but not limited to, market fluctuations, time horizon, taxes, and fees. Please consult a qualified financial advisor and/or tax professional for investment guidance.
