You want to give your kids a decent financial education, including an understanding of cryptocurrency. But, how do you get over the complaints of, “Boring!”? Nobody learns without motivation, children, teens, or adults. You can never teach anything to teenagers who are not interested.
The trick to teaching crypto is to find a way to make teenagers interested. When you do that, their brains switch on, and they start putting things together for themselves.
Crypto Intro
If you need a simple introduction to cryptocurrencies, this Dummies Guide article makes easy reading.
Also, Q&A pages at e-cryptonews.com provide further reading about how blockchains work and are a good resource if you are looking to explain the mechanics of buying cryptocurrency to a beginner.
Trading Crypto
Once your son or daughter is old enough to start earning their own money, you could introduce them to the concept of trading crypto.
Before your teens start trading crypto they need to understand how cryptocurrency prices move only because of changing supply and demand, the same as any other financial market – That predicting price movements is about predicting changes in demand.
Trading crypto is unbelievably easy; trading at a profit is harder
Trading vs. Investing
Learning to trade profitably will interest teens more than long-term investing. You can see the results of your trades in minutes or hours, rather than years. You can talk about the importance of investing for the long haul when your teens are a few years older.
Markets
How do you teach anyone how markets work?
About the way prices increase when demand outstrips supply and fall when demand falls? Reading the financial pages of newspapers or financial education books is one way, but that won’t motivate many people. It can be part of your teens’ financial education, but you need to get their interest first; you need to make a game of it.
Using a virtual trading app works for many people.
Virtual Trading
Most online trading services offer free virtual trading. An email address is all you need to sign up. You can do it all from a phone app, or use a laptop if you want a bigger screen. Start each individual off with a $10K virtual account and challenge them to increase their virtual funds.
Your money is safe; you never give your card or bank details because you are only using pretend money. Your teens aren’t limited to the trading of cryptocurrencies. Trading platforms let you trade virtually in stocks and forex using the same app.
Most first-time traders will lose their initial $10K pretty quickly by making random trades without research. When that happens, start them off again, but emphasize the importance of research and following simple rules.
Trading CFDs
Buying cryptocurrencies, forex or stocks is expensive, even in virtual terms. You also lose money if the price goes down.
CFDs (Contracts for Difference) let you predict whether the price of an asset will rise or fall. If your prediction is correct you make a profit; if it’s wrong you make a loss. When you trade CFDs you can make more trades than actually buying assets because you only stump up the projected increase or decrease in its value rather than its entire value.
Better Virtual Trading
Once your kids have lost all their 10K in pretend money, they are more likely to take notice of your advice. Now is the time to hit them with basic trading strategies:
• Subscribe to free tip sheets – Pro traders give away a few trading ideas
• Follow the news – Helps with predicting changes in demand
• Keep all trades less than 10% of their virtual capital– Helps prevent large losses
• Exit all trades the same day – Prevents overnight charges and losses arising from late news
• Establish stop-loss positions– Teaches that it is better to take a small loss than a potentially catastrophic one
• Establish take-profit positions – Better to take the expected profit than to hold on for more and then lose it all
• Avoid over-exposure to one sector– Reduces the risk of losing everything if the chosen sector goes in an unexpected direction
• Become an expert on one area – concentrate on crypto, forex, or stocks CFDs rather than trying to mix and match
• Avoid impulse trades – Buying on impulse is a great way to lose money fast
• Ask for advice– A second opinion will help prevent the worst mistakes
Understanding Risk
Your teens will probably need to go through three or four cycles of investing $10K of virtual cash before they master the basics of trading. Even then, switching to real money is too risky. You have achieved your objective if they understand trading mechanics and markets well enough to consistently make small profits.
Trading is always risky. Professional traders lose money on some trades. Most new traders fail to follow basic trading rules and lose their trading capital before they learn how to trade profitably. Understanding the risk in any trade and weighing it against any potential gain is crucial to profitable trading.
This understanding takes years of experience to develop, so new traders should limit their trading to virtual accounts for at least three years.
