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Tooth Fairy Finance

"Money only brings happiness if used properly and to do good... let them see the joy that comes from giving back."

Most children begin to anticipate a visit from the Tooth Fairy the minute they feel a loose tooth. With just a little time and a lot of wiggling, the extracted tooth becomes a guaranteed payday from the bicuspid collector herself. No matter what treasure your children find under their pillow, this “magical” money can be used to teach them about real-life finances and money management.

The actual dollar amount doled out by the glittery fairy varies by which tooth is lost, age of the child, and health of the tooth. Dr. Kurt Sturz, a local pediatric dentist, says, “One of my favorite reminders and encouragements for kids to be better brushers is to let them know that a tooth with a cavity or a filling in it is never worth as much as a perfect, clean, and healthy tooth,” he says.

The economy’s decline has affected almost everyone, even the Tooth Fairy. According to a 2011 survey by Visa Inc, the average payment per tooth is $2.60, a decrease from last year’s $3.00. Dr. Sturz says the Tooth Fairy in Bakersfield continues to be generous, usually paying between $1 and $5 per tooth. “There is often a lot of variation in how much the Tooth Fairy leaves behind under the pillow; but one of my favorite traditions involves the FIRST tooth lost fetching a special prize, and then $1 for every year old that the kid is when they lost the tooth,” he says.

Sherod Waite, Investment Advisor and Partner of Moneywise Wealth Management, encourages parents to use the tooth fairy’s visit as an opportunity to have conversations with your children about financial concepts and money management skills. “My experience has been that children begin to understand the concept of money much earlier than we think,” he says. “Our society and daily living involves so many money transactions and dealings that the small children we lug around with us on our errands often are exposed to money very early and very often.”

Michael Olague, Senior Vice President and Area Manager for Bank of the Sierra, agrees that helping children understand the value of money will prepare them for a better chance at a financially sound future as an adult. “The sooner you get a child to understand basic finances, the better for them,” he says. “Today, more than ever, we need to teach our children the concept of savings and how to be a prudent buyer.”

With some simple tips and planning, even a quarter from the Tooth Fairy can provide an opportunity to teach your children valuable money management lessons that can last a lifetime. Here are some ways you can use this fun and fantastical rite of passage as a teaching moment:

Money Conversations

Use the Tooth Fairy money to start a financial conversation with your children, even if they are only five years old. Ask them what their plans are for their money to gauge their knowledge and understanding. Keep the conversation age appropriate introducing words like savings, dollars, and accounts; and use activities like playing store to teach them to learn the value of a dollar. To help them realize what things cost, share your family bills such as utilities, mortgage, and car payments with your children.

“I talk in pretty good detail with my kids about money. I don’t want it to be weird or uncomfortable to talk about finances in the future, so I talk openly with them now,” Waite says.

“Let your kids know more about the family budget and get them involved in savings plans. Talk to your kids about the efforts that are involved in earning a living. Talk about different career earning potentials. “

He also recommends teaching them about social etiquette when talking about money, income, and savings and to avoid asking personal details and dollar amounts in these areas. Olague says parents should be honest about their family’s finances and explain to their children why they spend money on some things while not on others. “Don’t give them the burden, but you want to be honest to give them a lesson,” he says.

Saving vs. Spending 

Waite says when it comes to saving vs. spending there are many rules of thumb. But, the one he sticks with is saving 10 percent; donating 10 percent to a worthy cause; and budgeting 80 percent for spending. “Money only brings happiness if used properly and to do good,” he says. “If we focus too much on saving for the long term, kids quickly become disinterested. Let them buy things they enjoy and let them see the fruits of their labors. Also, let them see the joy that comes from giving back.”

Even with a quarter from your child’s lost baby tooth, you can teach them about the accumulation of wealth and how saving money over time can add up. “Twenty-five cents is just 25 cents, but four quarters is a dollar, and so on,” Olague says. “It’s not about the actual individual currency. This principle is about learning the accumulation of currency, and it helps them see money in a different way.”

Open a Savings Account 

Olague says that opening a savings account and having your children keep track of deposits and debits will help them understand the savings process. He recommends starting with a simple piggy bank in their room. Once it’s full, have them take it to the bank to deposit its contents. Have them physically count it to appreciate that money is a tangible object.

Waite says you can also use digital bank accounts to help parents and children keep track of their finances. He personally uses an iPhone application that tracks his three children’s accounts, and he reviews their balances with them weekly. “In this digital age, there are many tools to help parents keep track of their kids’ allowances, savings, and budgets,” he says.

Money Management for Older Children 

Beyond savings accounts, older children can benefit from more complex money management opportunities. “I like buying the individual paper certificate stock, and I have it framed for their bedroom. It helps to buy a stock certificate from a company that the child might be interested in. For example, Walt Disney, Harley Davidson, or Apple,” Waite says. “This gives them an opportunity to be reminded of the power of appreciation, and they often get involved in tracking the value of their share.”

For his oldest son, 13-year-old Riley, he has set up an investment account with hypothetical money.

If his portfolio makes money, Waite pays him; but if it doesn’t, there is no real cash lost. “I have instructed him on basic investing principles and then let him make the investment or stock selections. He does the research and the trades,” he says. “This has been a great tool in teaching him how to research stocks and what to expect with market fluctuations and risks.”

Be an Example 

Children learn by example. Just like with eating and exercising habits, they will learn their financial fortitude, or lack thereof, from their parents. Being an example is equal parts action, talking, and explaining. Without dialog about money, there can be too many assumptions made on your children’s part. “Showing an example of financial prudence and discipline is important,” says Waite. “The way we show a good example needs to be more than our actions. Time spent explaining and teaching goes a long way.”

For more information, you can hear Sherod Waite of Moneywise Wealth Management on KERN Radio 1180 weekdays from 10:00 a.m. to noon. You can also visit www.moneywiseguys.com, www.bankofthesierra.com, and www.drsturz.com.

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