Infographic: The Mormon Mom's Guide to Money

Are Bitcoins Worth the Risk?

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No matter how you feel about the bitcoin phenomenon, the existence of this alternative currency tells us something about the current economic environment we're living in. There are people waiting on a list to buy bitcoins, no matter what the coins' value is when the waitlisters arrive at the top of the list. At the beginning of the year, you could buy a bitcoin for $13.51. Last week (a mere 3 1/2 months later), bitcoins were trading for $266.

Buying bitcoins is risky, but many people consider are considering the risk to be worth it, especially after governmental fiascos like the one we saw in Cyprus just weeks ago. With governments behaving in such desperate and erratic ways, people are looking for a currency that is beyond the greedy reach of their lawmakers, something they can count on to take care of themselves. And yet, are bitcoins the best way to address these problems?

This is why bitcoins make me nervous:

• No government legally compels anyone to accept bitcoins as payment for goods or services, so you may or may not be able to use them when you need to.
• You have to trust unregulated institutions with your credit card information when you purchase bitcoins. This seems like a perfect set-up for fraud and identity theft.
• You have to trust a cryptographic network using computer technology that I will probably never understand.
• There's no guarantee that the existing bitcoin system will continue to honor future purchases or trades.
• Governments could intervene and render bitcoins worthless (like if the U.S. makes their possession illegal)
• The anonymous creator has mysteriously "moved onto other projects." 
• Bitcoins are highly vulnerable to theft since they're untraceable.

So that's why I'm not a big fan of bitcoins. That doesn't mean I don't own any myself, but I'm not going to make them a big part of my overall financial plan.

When it comes down to it, my 401k makes me pretty nervous sometimes, but my real estate never does. For more information about investing, check out Farsighted: The Mormon Mom's Guide to Money. I won't steer you wrong.