Why kids are ploughing their pocket money into crypto

On the bus the other day, I was struck by a conversation a young teen was having on his mobile. Barely 13 or 14 years old, he was talking about how much he was transferring into his crypto account – $250 here and $100 here.

Aside from his surprising level of wealth, what stood out was the confidence this pint-sized teen had in his transactions.

Forty per cent of US children believe crypto is the future of investing.Credit: Bloomberg

Crypto dad Nathan Carloss has seen similar confidence in his 11-year-old son, Lachlan, since he began investing in crypto in 2022. The father of three wanted to help his son increase the pocket money he received from his grandparents and plastic bottle returns.

“My son stored his earnings in a bottle. I told him you can make your money work for you,” Carloss says. “I started to educate him on the basics of investing like property, shares and crypto.”

Lachlan liked the sound of high returns and chose crypto, so Carloss set up an account with online exchange Swyftx, under his name and a family trust and mainly investing in bitcoin.

He adds the experience has been very positive.

“I’m teaching my kids the importance of developing long-term investing and savings habits. Now, Lachlan is much more careful with how he spends his money. He asks me for crypto price updates every few days,” he says.

Future of investing?

According to T. Rowe Price’s 2022 Kids and Money Survey, 40 per cent of US children believe crypto is the future of investing. The research sampled more than 2000 parents and their children, aged 8 to 14.

Fifty-seven per cent of children said they were familiar with cryptocurrency, compared with 47 per cent of parents. Among the parents familiar with crypto, 32 per cent say their kids actively trade in it more than they do.

Nathan Carloss says his son, Lachlan, has become much more careful with his spending since being introduced to crypto.

In Australia, cryptocurrency exchanges will not let you create an account unless you’re over 18. YouGov’s annual tracking survey found a third of Aussie parents with kids under 18 at home said they had not bought crypto to hold in trust for their kids but, intend to in the future. A further 13 per cent said they had purchased crypto to hold in a trust.

Appetite for risk

Financial education expert, Dr Tracey West from Talk Money, a financial education program used in schools, said teens’ interest in crypto has peaked over the past few years.

“Our Talk Money facilitators are often asked questions about ‘investing’ in crypto, and students mention crypto in our survey feedback. While our workshops do not explicitly cover cryptocurrency, we discuss influences on spending in online gaming in our year 5 and 6 modules,” she says.

There are several reasons kids are comfortable buying cryptocurrency, she adds. One is being a digital native and becoming familiar with digital currency through their online gaming activity, as cryptocurrencies are easy to buy online.

Young people tend to have a higher appetite for risk, and are more willing to experiment, especially with get-rich-quick opportunities. They may have more distrust in established norms than older generations, including the role of government in society and financial institutions.

Influencers and online communities play a significant role in shaping young people’s views on crypto.

“It’s heavily discussed on social media platforms. Many young people see stories of people making millions from Bitcoin or NFTs, they don’t want to miss on ‘the next big thing’. This drives them, even if they don’t fully understand it,” adds Dr West.

Buyer beware

Buying cryptocurrency is a speculative activity, and the risk of losing cryptocurrency stored in a digital wallet, exchange account or through the exchange is quite high. Cybercriminals find it lucrative to infiltrate digital wallets with password-stealing software or malware hacks.

“There is a real risk of losing the amount spent, either by the price crashing or it being stolen. The only value it has is what someone else would be willing to exchange it for, and it is difficult to predict other people’s behaviour and future trends,” said Dr West.

Furthermore, if your child holds shares in their name and earns more than $416 in investment income during a financial year, you’ll need to lodge a tax return on their behalf.

If a parent owns the shares in their name or if the parent invests as a trustee, they must declare dividend payments and capital gains tax events on their tax return.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.