When Teeth Pay Off

Recently my oldest child lost her first tooth. After weeks of providing reassurance that the outcome would be survivable, despite the tooth becoming more and more wiggly, the tooth finally let go. We are thrilled to report that there were no tears, only a proud five-year-old holding a tiny tooth.

What is this tooth worth, we began to wonder. As a data curious person who likes benchmarking, I was pleased to find there is an index tracking the average value of children’s lost teeth. Delta Dental’s Tooth Fairy Index tracks average gifts from the tooth fairy going back to 2001. Over the history of almost 25 years, a tooth’s average value has risen from around $1.50 to the current average of $5.01.

Interestingly, the latest $5 average is down from the index peak in 2023 when average tooth prices topped $6. Even the tooth fairy seems to have been affected by higher interest rates over the past couple of years.

Regional data is also available as part of the Tooth Fairy Index. Kids in the southern United States tend to receive the largest payouts from the tooth fairy at an average of $5.71. Kids in the Midwest might not enjoy hearing that, based on their average receipts of just $3.46.

Until average tooth values fell by 14% over the past year, the Tooth Fairy Index had outpaced the S&P 500 for most of the last two and a half decades. Only recently has the Tooth Fairy Index fallen below the compounded growth of the S&P 500 index. Until someone creates an ETF which tracks the Tooth Fairy index, we will all have to settle for the S&P.

We were relieved when the tooth fairy paid our house a visit on the very same night our daughter’s tooth broke free. Despite her payout from the tooth fairy being slightly below average, the next morning my daughter announced that she had counted her money including the amount under her pillow, plus earnings from selling muffins to neighbors at the end of our driveway several months earlier. “I have twenty dollars” she exclaimed, “which means I can buy everything in all the stores”.

That excitement led to us talking about how much some things cost, ways to earn money like working, and other ways to use it like giving some away and growing its value. It turns out that five-year-olds have limited attention spans for discussing the fundamentals of finance, so we will revisit those topics periodically. We also plan to try some hopefully fun exercises to teach principles like compound interest by having Mom and Dad offer to pay a high interest rate on a small amount of money to show how it can grow. In the short term, we are keeping our expectations grounded about how much these teachings will initially resonate.

In the meantime, we plan to keep talking about the basics of money, while also brushing diligently and checking for more wiggly teeth.

Cam Simonds