financial gifting

How to Invest in Crypto for a Child

March 28, 2022

The increasing popularity of cryptocurrency has changed the investment landscape. 

Most investors previously stuck to stocks, bonds, real estate, and mutual funds. But now, an entirely new asset class has entered the mix: Cryptocurrencies, such as Bitcoin and Ethereum. While crypto can be volatile, it has been one of the best investments of the last decade. 

Parents and loved ones may be wondering — does it make sense to invest in crypto for a child? 

This informative guide will explain how to invest in cryptocurrency for children — and why you may want to consider it. 

Need a refresher course on cryptocurrency? Read through our intro to cryptocurrency guide. 
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How to Invest in Crypto For a Child 

Adults can simply buy cryptocurrency through a crypto exchange. But when it comes to children, the crypto investing strategy needs to be a bit different. 

This is mostly due to age requirements from cryptocurrency exchanges. All reputable exchanges in the United States require users to be at least 18 years old. 

If someone wants to invest in crypto on behalf of a child, what they essentially need to do is buy the crypto and gift it to the child

Or, they can use a specialized custodial account (like EarlyBird) or buy crypto ETFs in a child’s custodial investment account

Here is an overview of everything you need to know about each of these strategies. 

Custodial account via EarlyBird Crypto 

The simplest way for adults to buy crypto for children is to use EarlyBird Crypto

EarlyBird investment app

EarlyBird is an investment app that lets adults set up custodial investment accounts and crypto wallets on behalf of children. 

Any legal adult can start an EarlyBird account and assign a beneficiary (the child) to the account. From there, any adult can contribute funds — making it simple for friends and family members to collectively invest in the children they love. 

When the child becomes a legal adult, they gain full access to the account. The money can be used for any purpose, including college, travel, or starting a business.

And EarlyBird isn’t just for cryptocurrency — it’s an app that makes it easy to build a diversified investment portfolio of stocks, ETFs, bonds, and more. 

The EarlyBird platform currently supports investing in Bitcoin (BTC) and Ethereum (ETH), the two most popular cryptocurrencies.

EarlyBird’s crypto offering is powered through a partnership with Gemini. Gemini is a regulated and trusted cryptocurrency exchange and custodian. Gemini keeps all your cryptocurrency safe, while EarlyBird makes those crypto assets available to invest in for children. 

EarlyBird’s mission is simple:

Help everyone invest in the children they love

  • Make it simple to access low-cost, diversified investments
  • Help future generations achieve financial freedom
  • Make it easy to gift wealth, not waste

EarlyBird is simple to use, even for complete beginners to investing. Get started with an EarlyBird custodial account today.

Cryptocurrency ETFs or mutual funds

Another option may be to buy cryptocurrency mutual funds or crypto ETFs. 

Mutual fund basics
(Image Source)

For this method, an adult must open a custodial UGMA or UTMA investment account via a stockbroker. The adult can assign the child as the beneficiary, and the account will transfer to the child’s control once they are a legal adult. 

From there, the adult can buy a cryptocurrency ETF or mutual fund. 

Most of these funds do not directly own cryptocurrency. Instead, they gain exposure to crypto assets through futures contracts.

The idea behind a crypto ETF is to loosely match the performance of the underlying cryptocurrency without actually owning it. 

For those who are genuinely interested in the technology behind crypto, this could be a downside. But for someone who just wants a bit of crypto exposure in their Portfolio, ETFs present a decent option. 

Keep an eye on fees, however — many crypto ETFs have high expense ratios, which are yearly fees that can substantially reduce long-term performance. 

Right now, most crypto funds focus on Bitcoin — but it’s expected that more will launch soon. 

Learn more about cryptocurrency ETFs to decide if this strategy is right for you. 

Cryptocurrency exchange and crypto wallet 

A third option is to use a cryptocurrency exchange, such as Gemini, to buy cryptocurrency directly. 

Gemini crypto exchange
(Image Source)


Children cannot have their own crypto exchange accounts, however. Exchanges require users to be legal adults. 

There are two workarounds for this problem: 

  • An adult can use their own crypto exchange account to buy and hold cryptocurrency. Later, they can sell the assets and gift the money — or gift the crypto to the child once they are a legal adult. Be wary of potential tax consequences in this scenario. Consult your tax advisor for details. 
  • An adult can buy crypto in their own account and then transfer it to a hardware wallet to store the cryptocurrency. They can then gift the physical hardware wallet to the child. This is a more advanced strategy, and improper use can result in the loss of the crypto assets. The child must be able to keep the physical wallet safe and remember their secret seed phrase (passcode). 

Frequently Asked Questions

Let’s answer some FAQs about investing in crypto for a child.

Can children buy cryptocurrency?

There is technically no age limit to buy crypto. However, many cryptocurrency exchanges have a minimum age of 18 years old (see below). 

In other words, children can own cryptocurrency, but buying it is more tricky. 

Using EarlyBird is the simplest alternative here. The other workarounds to this problem are discussed in more detail in the article above. 

Can you use a crypto exchange when you’re under 18 years old?

In the United States, most crypto exchanges require users to be at least 18 years old. Gemini requires all users to be at least 18 years old, as does Coinbase — and every other trustworthy crypto exchange available to U.S. residents. Coinbase previously allowed users as young as 13, but this policy was changed in 2017. 

Is cryptocurrency safe? 

If you purchase crypto through EarlyBird or a trusted crypto exchange, cryptocurrency is safe. It can be more volatile than many other asset classes, however. 

Volatility refers to how often (and how significantly) an asset’s price changes. Cryptocurrency is known to be volatile, meaning that its values can have significant swings day to day and week to week. 

Most financial experts recommend that cryptocurrency be kept to a small portion of your overall portfolio. In other words, it’s best to invest in a variety of assets — including stocks, bonds, and cryptocurrencies. 

Read our crypto safety guide for more detailed information.  

Is crypto better than stocks? 

Cryptocurrency is a relatively new asset class, so it’s difficult to compare it to an age-old asset like stocks. In its short history, cryptocurrency has returned far more than the stock market — but it’s difficult to know whether this trend will continue. 

It’s likely a wise choice to include both crypto and stocks in an investment portfolio. 

Read more in our cryptocurrency vs. stocks guide.

Conclusion

Investing in cryptocurrency is a bit different from traditional assets like stocks. It’s important to understand the basics of crypto and the risks associated with it. 

If you want to invest in crypto for a child, there are a few different options. In most cases, a custodial account is ideal, as it removes the issue of minimum age requirements. 

EarlyBird Crypto is a simple option to open a custodial wallet for a child. EarlyBird now supports both Ethereum and Bitcoin — with plans to expand into other cryptocurrencies soon. 

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