How the Tooth Fairy Can Teach Your Kids About Money

By Nat Sillin

When kids lose their first baby teeth around age six, it’s more than just a chance to celebrate a milestone. It’s also an early opportunity to teach them fun lessons about money.

Sure, you can simply tuck $5 under a pillow — that’s the going rate for teeth these days, according to a poll from Delta Dental. But a visit from the Tooth Fairy is also a chance to talk to your children about money, which the American Psychological Association says is essential for helping them develop healthy money-management habits.

Here’s how you can kick-start some important financial lessons, without taking all the fun out of the Tooth Fairy’s visit.

1. Use a piggy bank to encourage saving

Before the first tooth comes out, consider giving your child a place to keep their money. After all, your little one has 20 baby teeth that will eventually fall out. At $5 a pop, that’s a total of $100 from the Tooth Fairy. 

Your money container doesn’t have to be anything ornate: You can decorate a small box or find a piggy bank at the dollar store.

Once your child is around six, consider setting up a few piggy banks or boxes for different purposes, to introduce basic money management skills. Here are the categories we recommend:

• Spending: Money to be used for fun or unplanned expenses, like buying a small toy or candy.
• Saving: Funds that will go toward a specific goal, like taking a trip to the zoo or buying materials to start a lemonade stand. You might even set up a fund that everyone contributes to for a family vacation.
• Gifts and donations: Cash they’ll give away to a special cause or use to buy gifts for friends or family. 

You can also help your child determine how they want to split their money amongst the different categories. For example, they may want to put a set percentage or dollar amount into a certain box each time they receive money.  

Whatever the details, a visit from the Tooth Fairy can simply reinforce the plans your child already has in motion.

2. Talk about the value of money 

It can take some time for children to grasp the value attached to money. For example, your child may be just as excited to receive a $1 bill as they are a $20, or they might assume that having two $1 bills is more valuable than having a single $10. 

A visit from the Tooth Fairy can be a good opportunity to improve their understanding of currency and its value. Here are a few activities that can help: 

• Let them handle different coins and discuss what each one looks like.
• Point out where to find the value printed on each coin and bill.
• Sort the currency in order from least to most value.
• Show your child how different combinations can add up to the same amount.
• Hand your child multiple pieces of currency and see if they can determine the total value.

3. Help them make a purchase

Another important lesson a child can learn, even if they just have a few dollars, is how to make transactions with money. 

Before heading to the store, try role-playing as a customer and cashier at home. You might even place some fake price tags on items around the house and walk your child through the process of determining what they can afford. This is also an opportunity to explain that sales tax may increase the total cost.

Then, once you determine how much your child will spend from their Tooth Fairy money, you can head to the store to look for a small toy or treat. 

Once they choose what to buy, let your child be in charge of the transaction. This can help them learn how to communicate with sales clerks and collect any change that’s due.

Handling other sources of money

For many kids, the Tooth Fairy will be the first person (or fairy?) to give them their own cash, but she won’t be the last. For example, family and friends might give them cash or gift cards for birthdays or holidays, or you might start introducing an allowance they can earn for chores.

Any time your child receives money, make a point to keep the discussion going. Help them remember and keep track of their savings and goals. 

Eventually, you can even move the money to a real bank, or introduce more complex concepts like budgeting, investing and avoiding debt. If you need a refresher on personal finance topics like how to create a budget, save money or manage credit, an NFCC-certified credit counselor can help.

Frequently asked questions (FAQs)

How much does your child understand money?

According to Parents, most children start to understand how money works between the ages of six and eight. At this stage, they can go from imaginary play with money to understanding concepts like saving money or setting up a bank account. 

How much should the Tooth Fairy pay for each tooth? 

The average amount kids receive per tooth is now $5, which adds up to $100 for all 20 teeth. Ultimately it’s up to you to decide how much to pay for each tooth based on your budget.

Nathaniel Sillin directs Visa’s financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.