How the Tooth Fairy Can Teach Your Kids About Money

When those first baby teeth start wobbling, you and the Tooth Fairy can combine forces to teach your kids about money.

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.

First, how much should parents give? Visa offers a free Tooth Fairy app (www.practicalmoneyskills.com/apps) for iOS and Android devices and an online calculator (www.practicalmoneyskills.com/toothfairy) to help parents determine an appropriate amount for children to receive per lost tooth. 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.

You might consider giving kids a piggy bank – or a series of piggy banks for specific purposes such as spending, saving or investing – to have ready once that first tooth comes out. Talk with your child about the importance of putting some money away when it comes in for various purposes including charity, so he or she learns about the importance of helping those with less.

Here's how the Tooth Fairy can help you guide your kids through their 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. Start by letting them handle a few coins and then start identifying 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. Tooth Fairy money may be a child's first source of income. 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 head to the store with your kid 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, put the child in charge of the transaction.

Dealing with other sources of monetary gifts. The Tooth Fairy often provides that first connection between kids and cash, but other money resources usually arrive soon afterward. Starting school means allowances and children may already be getting birthday and holiday gifts of cash from friends and relatives. With every new source of funds, keep the discussion going on the importance of spending wisely while saving, investing and giving to those in need.

Budgeting. As kids get older and start using money more extensively, introduce them to the concept of budgeting – the practice of tracking, counting and allocating spending. Parents might want to give themselves a refresher course (http://www.practicalmoneyskills.com/budgeting) if they're not consistent about budgeting their own money.

Moving from piggy banks to real banks. Kids can keep a piggy bank around as long it's effective, but kids need to see how adults handle money. Regular trips to the bank allow children to ask questions about how banks work and why they're important. Eventually, they'll be ready for their first savings account. See what account savings options your bank provides for young children.

Bottom line: Lost teeth are an educational gold mine for your kid. You and the Tooth Fairy can work together to make each little windfall an important lesson about money.