Saving

Kids can get $5 a tooth from the tooth fairy — how to use it to teach them to be good with money

Twenty20

Average tooth fairy payouts for kids in the United States are $4.90 per tooth, a 2.7% bump from last year, according to the new 2019 Allowance Report from RoosterMoney. The UK-based allowance app surveyed 35,000 kids between the ages of 4 and 14 in the United States who use their app to receive and manage their allowance and other gift money.

At that rate, multiplied over 20 baby teeth, a kid could end up with nearly $100 from the tooth fairy. That's money you can use to help set your child up to be good with money for life.

Kids are earning and receiving more cash

The tooth fairy isn't the only one giving kids a raise. Weekly allowances are on track to rise 3.6% over 2019, with an average weekly payout of around $9.39.

Between allowances, tooth fairy money, and other gifts, kids are on track to pull in an average of nearly $500 this year.

Those increases are promising, experts say, especially considering concerns about a possible economic downturn: Two-thirds of Americans fear a recession could come in the next year, according to the latest CNBC Invest in You survey.

"It's a positive sign that parents are willing to overlook their short-term uncertainty in the economy," says James Kassam, RoosterMoney's head of marketing. "Hopefully that's an indication that they are prioritizing their child's long-term financial education."

How to teach your kids to be good with money

Experts say giving your kids hands-on money management experience is a key to helping them form good savings habits. The RoosterMoney survey found that American kids are saving more of their allowance, and Kassam believes that's a good indicator that kids are developing a stronger sense of delayed gratification in the process.

"They are saving for what we would call big-ticket items, kind of ambitious items, like large Lego sets, mobile phones, games consoles, that kind of thing," he says. "I think that's a positive sign. As opposed to saving for smaller items here and there, they've got ambitions."

It's a positive sign that parents are willing to overlook their short-term uncertainty in the economy. Hopefully that's an indication that they are prioritizing their child's long-term financial education.
James Kassam
Director of marketing, RoosterMoney

Whether you peg allowance to chores or give your child a set sum of money each week, experts say setting a consistent pattern from a young age is vital. One recent study from Cambridge University suggests that kids can develop a decent sense of how to save money by the time they turn 7, and the National Education Association (NEA) has financial literacy lesson plans for children as young as 4.

"What you're doing is trying to create what it's like to have a paycheck," Paul Golden, managing director of media and communications for the National Endowment for Financial Education, told Grow earlier this year. "If they spend all the money within three days of receiving an allowance and run out, then they have to wait until they get paid again."

Personal finance expert Farnoosh Torabi also recommends parents use gift money — including birthday checks and tooth fairy money — to spark discussions with their kids about interest and saving. "While your 4-year-old may not be mature enough to make smart moves with large sums of money, don't underestimate his or her ability to notice positive financial modeling," she recently wrote in Grow's "Asking for a Friend" advice column.

It's an easy way to set your child on the path to financial success.

"Talking about money as early as possible is the key," says Kassam. "These stats all just back up the fact that if you start engaging kids with money early, they'll develop positive saving habits."

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