You may have heard of the recent financial advice that recommends you invest in NFTs to help you pay for college. However, it’s important to know what exactly an NFT is and your options before making a decision.
What are NFTs and How do They Work?
An NFT, or a non-fungible token, is a virtual asset that is stored on the blockchain. This can include digital files such as video or photos. The original artists retain the rights to the media, but the NFT itself is unique to the buyer. The buyer can later sell the NFT to another individual and potentially make money on the investment. Each NFT is unique and identifiable, and usually held in a cryptocurrency wallet.
An NFT can have its uses. Some have sold to help nonprofit organizations, while others could support an artist. One example of an NFT: An artist puts out a music album. However, only one digital copy of this album exists and it is sold to an individual, likely a fan who absolutely loves their music. The artist retains rights to the album, just as they would if it was publicly released. But, only the individual truly has access to the original album as intended.
The Future of NFTs Isn’t Clear
While NFTs can have their real life uses, they are limited, and the future of NFTs is far from clear, especially when it comes to investing.
For one, the legal rights surrounding non-fungible tokens can be a bit murky. NFT ledgers are supposed to provide a certificate of authenticity or proof of ownership, but sharing and copying of images, for example, that are “NFTs” is widespread – even if those copied images don’t have the “proof of ownership” attached.
And while an NFT could increase in value, there is absolutely no guarantee. NFTs are almost always sold using cryptocurrency, which can drastically change in value overnight. Some compare the investment in NFTs to the purchase of Beanie Babies in the 90’s. Individuals thought that Beanie Babies kept in pristine condition would someday fetch them thousands of dollars. But in reality, there is no predicting the future. Beanie Babies certainly didn’t increase the way buyers thought they would, and NFTs may head the same way. And if the NFT does increase in value, will it increase in time for you to cover college costs?
It’s also important to note that NFT scams exist. Some artists have been accused of buying their own NFTs in order to drive up prices and make the work seem like a more invest-worthy option, for example. Individuals with investments, whether NFTs or otherwise, should also be wary of phishing scams as there have been many recently thefts that have resulted in over $1.7 million being swiped from digital wallets.
There are Other Options
If you’re not sold on the NFT or don’t want to take the risk, there are plenty of other financial options to help you pay for college. If you’re younger, you could talk to your parents about 529 plans, for example. You could also look into working with a broker if you have money to invest, starting a high-yield savings account, or begin small with an investing app.
Using NFTS to pay off college is still up in the air and requires more research. If you do decide to invest in one, be sure to vet the artist, the wallet, and projected ROI. In some cases, it may be much more worth your time (and safer) to simply use the money you’re thinking to invest in an NFT into college directly.
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