Baby-Tooth Bubble: Has the Tooth Fairy Lost Her Mind?

The Tooth Fairy is one girl gone wild. Some kids are getting $50 a tooth and the average bounty is up 42% in two years. Here's what the trend says about the economy and our collective parenting skills.

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You may not believe in the Tooth Fairy, but she believes in you and the U.S. economy in a big way. The winged pixie this year is leaving a bountiful $3.70 per tooth, on average. That’s up 23% from last year and up 42% from two years ago, according to an annual Visa survey.

This surge in generosity coincides with a strengthening economic recovery: The stock market is up this year and home prices have begun to rebound. Second quarter GDP was just revised to an annual rate of 2.5%, up from an initial estimate of 1.7% and well above economists’ expectations. Many believe the third and fourth quarters will show further improvement.

So it may make sense that the Tooth Fairy is cutting loose. But it’s starting to look like, well, a baby-tooth bubble. The mythical figure “visits” 90% of homes with kids and her largesse varies widely at each stop. Some 2% of children get $50 for an incisor, a sum so outrageous it deserves comment.

“Kids are obsessed with the Tooth Fairy,” says Jason Alderman, who runs Visa’s financial literacy initiative. “Losing a tooth creates a great opportunity to talk about money with them. But telling them their tooth is worth $50 is counterproductive. It devalues the dollar in their eyes.”

Such households are outliers, of course. But don’t assume the biggest payments are made in the biggest houses. The younger the parent and the lower the income, the bigger the molar bounty, Visa found. The most common payout is $1 per tooth. But parents aged 18-24 give an average $5.20 and parents earning less than $25,000 a year give an average $4.10.

This smacks of competitive tooth fairying. “Parents really are paranoid about their kids getting as much as their friends,” says Alderman. With the amounts being so small to begin with, just about any household can afford to go large. Young parents do it out of inexperience; low-income households do it as an easy way to keep up or even best higher-income neighbors or schoolmates.

Education seems to play a role as well. The longer parents were in school the less the Tooth Fairy leaves under their kids’ pillow, Visa found. To help parents get it right, Visa sponsors a free Tooth Fairy Calculator app at the iTunes store and another on Facebook.

A little pixie dust on the pillow really does offer parents a chance to begin the discussion about money with their kids, who should start learning as early as three. On its highly regarded website, moneyasyougrow.org, the federal government says at:

  • Ages 3-5 A child should come to understand that you need money to buy things; you earn money by working; you may have to wait before you can buy what you want; there’s a difference between what you want and what you need.
  • Ages 6-10 A child should come to understand that you must make choices about how to spend your money; you should shop around for the best deal; it is dangerous and costly to share too much information online; putting your money in a bank account will protect it and earn interest.
  • Ages 11-13 A child should come to understand that it is smart to save 10% of what you earn; entering credit card or Social Security numbers online puts you at risk of identity theft; the earlier you save the more you’ll have in the long run; a credit card is a loan and you will owe more than you spent if you do not pay your bill in full each month.

Why not get them started with that first lost tooth? You can talk about budgeting, saving, and giving while they are still buzzing with excitement over their mysterious payday.

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