Children’s Day 2021Q: Should you introduce your child to the world of cryptocurrency? This might sound a bit awkward to you. Padmanabha Ramanujam, Professor at IFIM Law School, says that in general it should be that your child exposes you to the world of cryptocurrency. But if it is not, then perhaps this is the best time to introduce your child to cryptocurrencies. But the question is why, and how? Parents invest money in options like stocks, fixed deposits, mutual funds, properties, small savings schemes like PPF, SSY etc. to secure the financial future of their children. While investing for children is the responsibility of the parents, it is also necessary to explain to them what is the importance of money in life and what a person should do to generate money and grow it.
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Experts opinion
WazirX CEO and Founder Nischal Shetty says that investing in cryptocurrencies can also serve the purpose of traditional investment options. This means that cryptocurrencies can also be seen as an investment option like other investment options. However, for better returns in this, investors have to understand the risks associated with it and invest wisely. For this it is also important to understand the crypto ecosystem.
- Shetty told FE Online, “Parents tend to invest in long term investment options like stocks, FDs etc as it has the potential to generate better returns for children, similarly crypto can generate substantial returns . Children do not have their own accounts, so parents or guardians can invest in the crypto world on behalf of their children. With the way the cryptocurrency market continues to expand, it is becoming increasingly important for parents to teach children about crypto and blockchain. This is necessary to further diversify your investment portfolio.
- Shetty further added that it is not difficult to invest in cryptocurrencies today, but finances should be managed carefully as crypto is a high risk investment. Moreover, it is actually a smart move to understand the crypto world at an early age with the right education and awareness as it prepares the children for the upcoming challenges related to the industry.
- Blockchain expert Sharat Chandra says the best way to teach kids about crypto is by giving them a crypto wallet instead of a “piggy bank”. This will make it easier for them to understand crypto tokens as “digital money”. After this, parents can explain different types of digital tokens to their children in simple words with examples.
- Chandra told FE Online, “Once kids understand these tokens well, they can start collecting crypto on their own. Collecting tokens can be a step towards educating children about compounding and it will also inculcate good financial behavior in children.
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- Professor Ramanujam suggests that parents should introduce cryptocurrency to their child in electronic form as an alternative currency. Apart from this, you should also tell your child that investing/trading in crypto can be started only through a smartphone. There are many mobile apps through which one can be connected to the crypto world electronically without any hassle.
- Your child might have a question that why is there a need for an alternate system for payment when the mainstream currency already exists in digital form and can be used. Professor Ramanujam says that it is also important to tell children about the history of cryptocurrencies. Don’t forget to tell them that the first cryptocurrency i.e. Bitcoin was the result of the recession of 2008. Now the price of one bitcoin is equal to about half a crore rupees. This shows that people have increased confidence in it.
- Cryptocurrencies are not yet being used for daily transactions and are mostly limited to trading and investing. It has proved to be much better in case of fund transfer abroad as there is no extra fee charged and at the same time the process takes only a few minutes rather than several days.
- It is also important to educate children about the ups and downs and other risks involved. There is still no clarity in the rules and regulations related to crypto. Therefore it is very important to educate the child about the risks associated with cryptocurrencies. Professor Ramanujam said, “It is also important to tell the children that one should invest only as much as he has the ability to lose. One should invest according to his capacity.
(Article: Rajeev Kumar)
(Suggestions/recommendations regarding cryptocurrencies in this article are given by the respective commentators. Financial Express Online takes no responsibility for their advice. Please consult your financial advisor before transacting/investing in cryptocurrencies.)
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