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The Tooth Fairy: A Teachable Moment

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Now more than ever, from the internet to the schoolyard, children are inundated with messages about gifts and gift giving for every occasion. It is not uncommon for toddlers to begin cashing in on their baby teeth long before they even know what money is or where it comes from.

In fact, according to a new survey conducted by Visa Canada, 87 per cent of children under the age of 13 not only know who the Tooth Fairy is, they expect she'll visit and provide them with an amount of money somewhere between $1 - $5 per tooth. Even with inflation, that represents quite an increase since I was a kid.

For most parents, this simple gesture of giving actually presents some serious questions. It seems there is no clear answer on how much is appropriate to give. And once a decision on an amount actually has been made, the larger question is how we can teach our kids to appreciate what they are receiving, regardless of whether it's a gift, their weekly allowance, or a necessary purchase such as clothing or eyeglasses.

It helps if parents can focus on the ultimate goal: to create a moment of surprise and delight for their child while at the same time using the occasion as a teachable moment, one that will help our kids learn how to manage their money in the future.

One of the most important lessons is that a gift of money is best appreciated when shared with those less fortunate. If a child learns early on to take a small percentage of any money received from a Tooth Fairy visit or birthday gift and put it towards a charity, they won't lose sight of the central motivations behind the act of gift giving -- generosity and thinking of others.

Of equal importance for a teachable opportunity is an emphasis on saving, resisting the instant gratification of taking the money to the candy counter. If a portion goes into their savings accounts to help them save for those big ticket items they want, every child intuitively begins to understand the value of long term planning and setting priorities with money.

As your kids get older, it is always a good idea to have discussions with them about:

• What earning money means, using your own job and their allowance as examples.
• How to budget for planned and unplanned expenses.
• Needs versus wants - and the concept of delayed gratification.

If you need resources to help guide money conversations with your kids, here are a few helpful financial education sites:

• Visa Canada's free, fast-paced Financial Soccer video game (www.financialsoccer.ca)
• Visa Canada's games on our financial literacy website: (http://www.practicalmoneyskills.ca/games/, including Road Trip, Ed's Bank and The Smart Money Quiz Show.

Also, if you or your child's grandparents and can afford it and would like to be a little more generous than usual, you can always look into RESPs (Registered Education Savings Plans) and CESPs (Canada Education Savings Plans). To learn how they work, go to the appropriate links at http://www.hrsdc.gc.ca/eng/learning/education_savings/index.shtml.

And finally, remember that kids can't help but mimic their parents' behaviour, good and bad, so if they see you spending beyond your means to buy, they might very well follow suit later on when they too are adults.

This article is intended to provide general information and should not be considered an endorsement or legal, tax or financial advice.