Children can get up upwards of $5 for a tooth placed under a pillow, according to a new Visa survey. Can the Tooth Fairy’s generosity undermine a sense of financial responsibility in these future investors?
The Tooth Fairy is outpacing inflation by a mile, leaving an average of $3 per tooth this year, a 15 percent increase over the $2.60 left in 2011, according to a survey released today by Visa, Inc., a global payments technology company.
"This is not only good news for kids, but an ideal teachable moment for parents to engage their children in thinking about how to budget their windfall by saving a portion," Jason Alderman, senior director of Global Financial Education for Visa, said in a statement.
The Tooth Fairy is most commonly giving $1 dollar per tooth this year, according to the results of 2,000 telephone interviews conducted by Visa in July, but 18 percent of children receive $5, and another 8 percent receive more than $5. The sum can seem like a small fortune to a child and provides parents the opportunity to teach their children the basics of saving and budgeting.
Research shows that investors are more likely to save money if they create a formal savings plan, according to Visa’s Practical Money Skills program. A savings plan should include a goal, such as paying for college, a timeline for achieving the goal, a schedule for set-asides and a disciplined approach that treats contributions to saving as a required outlay. Budgeting provides a guideline for both spending and saving. Good budgeting skills can prevent today’s children from joining the majority of Americans who, according to Visa, routinely spend more than they can afford.
A recent survey from the American Institute of CPAs shows that most American children also receive an allowance, and the average amount is $65 a month. The association urges parents to pass along “financial sense with those dollars and cents.” Jordan Amin, chair of the group’s National CPA financial literacy commission, points out that an allowance – like a bonus from the Tooth Fairy – can teach children about earning, budgeting and saving. Lessons, he says, “that can help put children on solid financial footing.”
A large majority of Millionaire investors (74 percent) believe it’s important for children to receive an allowance to learn the value of money, according to a monthly survey conducted by Millionaire Corner in October.