When kids lose their first baby teeth around age six, it's more than a chance to celebrate a milestone. It's an early opportunity to teach girls and boys good money management.
Visa's latest annual Tooth Fairy survey indicates that the average price of a lost tooth is $3.19 in 2015. This is the fourth consecutive year that young Americans are finding more than $3 under their pillows from the fabled fairy. That puts a full set of 20 departing baby teeth around $63. The survey also found that the most common monetary gift given by the Tooth Fairy is $1, and that dads report the Tooth Fairy is more generous, giving nearly 27 percent more than what moms report.
Gifts are great - that's why children love the holidays and birthdays. But the Tooth Fairy's all-cash visits are a chance for even the youngest kids to learn that a sudden windfall has many possibilities.
First, how much to give? Visa offers a free Tooth Fairy Calculator app, Facebook calculator app and online calculator to help parents determine an appropriate amount children should receive for lost teeth. While not an endorsement of how much money children should receive, the app and calculator uses Visa's latest survey data and demographic factors such as gender, age, home state, family size, marital status, income and education levels to formulate how much money the Tooth Fairy is leaving in comparable households. The app is available for iOS and Android devices and on its Facebook page.
Consider giving kids a piggy bank - or a series of piggy banks for specific purposes such as spending, saving, investing or charity - to have ready once that first tooth comes out.
With younger children, identifying and achieving money goals should be made as simple as possible. That's why the appearance of the Tooth Fairy can assist in guiding children through the following important, first-time money activities:
Learning to handle coins and currency. Kids need a bit of time to get to know coins and bills - what they feel like, what they're worth and how they're used. Whether you talk to your kids about money for a few minutes at the kitchen table or when you have a few coins and dollars out for specific purposes, these are opportunities for kids to become familiar with money. Start by letting children handle a few coins with a brief talk about their value - how five pennies makes a nickel and two nickels make a dime, and so on. Before a child can save, spend, invest or share, they have to understand the value of money that the Tooth Fairy has left under their pillow.
Making their first purchases. Teaching your kids about the value of money is an important lesson. It's a chance to balance fun and priorities, wants and needs. Once a certain amount of money is set aside for savings, then you and your kids can head to the store to look for a small toy or treat. It's important to discuss the item first and to encourage comparison-shopping for the best price. But once the item is selected, the child should be in charge of the transaction. They'll learn how to communicate with sales clerks and start to understand that change can come back from the amount they spend.
Handling other sources of monetary gifts. The Tooth Fairy often provides that first connection between kids and cash, but other money resources surface quickly. Family and friends might start giving birthday and holiday gifts of cash. With every new source of funds, keep the discussion going on where a child's money is going with gentle reminders that it's fun to spend but important to save, give and eventually invest.
Getting paid for chores. Many families and child experts differ as to whether children should be compensated for household work. Some maintain that work to benefit the household and family members should be a lesson in shared responsibility, not compensation. Others believe that paid chores might provide a worthwhile money lesson if a child has a small, parent-supported goal - souvenirs for a trip or software for a computer, for example. Introduced correctly, certain paid chores may provide an introduction to a good work ethic and another opportunity to teach children about money and priorities.
Budgeting. Once children get comfortable with handling money, it's time to talk about budgeting. As a parent, you might want to give yourself a refresher course if you're not consistent at budgeting your own money. Budgeting - the practice of tracking, totaling and allocating spending - is the foundation of all personal finance activities. As soon as children start talking about buying what they want, it's time to begin the earliest budgeting discussions. This fun Budget Blaster worksheet allows kids to practice tracking their own spending and creating their own personal budgets.
Moving from piggy banks to real banks. Kids can keep their piggy bank around as long as the approach is working, but a full piggy bank at age 5 or 6 might be a signal to open a real savings account at a bank. Compare kids' savings account options at various banks for interest rates and fees, but generally, such accounts can be set up for children as young as 5. Even before that, taking a child to watch adults transact basic cash business is a good way to introduce what banks do and why they are important.
Bottom line: The Tooth Fairy is more than a source of mad money. Use every loose tooth as an opportunity to teach your child something new about managing money.
Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney