How to Explain Bitcoin and Money to Kids

Growing up in the time of Bitcoin

Remember being a child? The curiosity? The world was so big back then, so many things to learn. Most kids ask questions frequently, money is a topic that will come up sooner rather than later. It's important that our kids ask us questions about how the world works, and we should be prepared to answer those questions. (Virtual) Money is a complex topic, but the earlier kids figure out how to deal with it, the better they will be prepared for the real world. Some people believe that kids should learn about money as early as three years old.

probably a little too young

If a child asks you what Bitcoin is, you should counter: "Do you know how money works?". Depending on how old the child is, you should go in to different depths of detail:

1. A general overview what money is and how it is different from Bitcoin/crypto

2. A more in-depth explanation of how we went from gold, to money, to creditcards and finally to crypto

3. An explanation containing how the way central banks operate, and an overview about other asset classes and their history

Getting started

First of all, you should know about money yourself. There are numerous articles and videos online that help you understand the topic. You can read up on how central banks work, to give some perspective of how Bitcoin came to be. The younger the child is, the broader the explanation should be. However if your kid is eager to learn and asking a lot of questions, you should not hesitate to answer them. The concept of central banks, inflation and economic bubbles might be too complex for infants, but even a child understands that trading his favorite stuffed animal for a few pennies is a bad deal.

Bring the topic close to them step-by-step

If you want to give a broad overview on how money works, you should use analogies the child can relate to. Use things that they are using regularly to give an example of how we determine value, like their favorite toy or stuffed animal. Explain to them, how people used to trade things directly before people had money, and that it can be hard to determine whether teddy is worth 20 or 200 candy bars. Never forget to mention though, how much more important their relationships with others are, compared to anything they can own. It's also a great opportunity to tell them how rewarding it can be to share something that is valuable, but also something that is inexpensive.

From gold...

Since Bitcoin came to be with the characteristics of gold in mind, it might help to talk about it as well. Apart from its use in jewelry (which is quite frankly absolutely useless), gold has little intrinsic value as compared to a toy the child uses, so you need to tell them a little bit about the history of gold to help them understand its value. Tell them how people used gold for hundreds and thousands of years as a medium of exchange and a means of pageantry. Don't lose hope if they don't quite get it, it is a little random that a shiny piece of metal you dug up from the ground is worth anything

...to Bitcoin

We established that gold is valuable because people say it is. How does that work for Bitcoin? The underlying technology of Bitcoin won't be grasped by most people. But to understand the value of gold, you don't need to understand its chemical structure (even though it can't hurt). Therefore we don't need to focus on how the protocol itself works, rather than how the network effect makes it valuable, and how people are using it. As mentioned above, gold was used as a means of exchange, for which it works quite well. However, storing gold, especially huge amounts of it, is a challenge. Transferring huge amounts without anything going bad is an even greater challenge. Because it is virtual, Bitcoin is easy to transfer and easier to store. However, Bitcoin being virtual leaves you with nothing tangible, therefore people are still arguing whether it is worth something or not. Make sure to explain, that a network can be extremely valuable, but also lose its value quickly if something better comes along and people leave the network. It's a great opportunity to teach them about "not putting your eggs in one basket" too.

A few last words

Don't forget to teach your kids about sharing, how to be responsible with your funds and not to be presumptuous. The earlier they start being responsible, the easier their life will be later on.

Let me know what you think about this article, and feel free to add any information in the comments you think might be usefull ! Thanks for reading !

The information in this Blog is for educational purposes only and is not investment advice. I am not a financial advisor. Please do your own research before making any investment decisions. Online And Cryptocurrency investments are a volatile and high risk in nature. Don't invest more than what you can afford to lose.