It’s raining teeth in my house! It seems like every other day one of the girls is savagely ripping out teeth from their mouths. At times, I ask them if the tooth was even loose before the unexpected departure from their mouths. To me it was not a pleasant experience, ripping my teeth out. At times, I would let them just sit there because of how grossed out I was that it was wiggling and making that tearing sound/sensation in my mouth. In my house, with the loss of the tooth comes the “appearance” of the tooth fairy. Too be perfectly transparent, there is no REAL appearance of the tooth fairy….and while I think I probably could outdo Dwayne “The Rock” Johnson as a tooth fairy, I do not have a costume….at this time. The girls all still believe he/she/me is real!
With the appearance of the tooth fairy comes the age old question of how much (if anything) to give to a child for a tooth. Now I don’t know about you, but when I was a kid we used to receive a quarter. I do not want to be listed a cheap ass and give the girls what I received, so I bumped up the amount to $1. For all of you non-finance nerds, if you run the numbers this is a compounding rate of return of 3.25% over the past 43 years (since I was 5). In other words, if I invested my cherished quarter when I was 5 years old, in say a Treasury Bond and received 3.25% interest….I would currently have $1. To me….I was like “what an amazing dad”. Moreover, I was expecting a phone call from the Dad of the Year Committee letting me know that I would be the recipient of the 2021 Dad of the Year Award. All these ideas of what I could do with the awards money danced in my head. I finally settled that I would seed fund the girls college funds and all would be wonderful….right? WRONG.
First of all, no damn phone call. So I’d like to say “You suck” to the members on the Dad of the Year Award Committee. Second, I had a inquisitive look on the girls faces when they looked in the envelope that contained this one dollar bill…..this this this …..American Greenback. I thought it was a look of astonishment…..Maybe I gave too much. Perhaps, I would be scaling back on the next lost tooth. Oh hell no….the next question posed truly provided insight for me. I was asked, “Why does the Tooth Fairy give [insert friend’s name] $10 per tooth?. I had to scramble….I was temporarily at a loss for words. In my mind I was trying to quickly figure out the calculation for the compounding interest that this SOB Spendthrift Tooth Fairy was using (if you want to know it is …about 9% – You’re Welcome). As for my quick witted response, I said “Um, I don’t know”. They seemed to just buy that as an answer. I later explained that the reason for the larger payouts is very complicated. I went on to talk about economics, inflation, the Fed and a plethora of other things that I know would just confuse them…..and to never ask such a silly question again.
In the meantime, I have looked at the rate of return over the last 50 years in the stock market and it turns out to be about 6.8% (factoring in inflation). As it turns out, I was being a cheap ass with the girls…..so while I was not going to give them a rate of return of 9% on their payment from the tooth fairy, I did think they should get a little more for their teeth (thank god they don’t have teeth that keep falling out like a shark). So what did I end up moving my payment to you ask?
I decided to go with the average rate of return for the stock market and take that up to the higher of number. Nerd alert…..43 years of compound interest of a quarter at 6.8% gives you about $4.23….I rounded up to the nearest whole dollar….So it is now $5 per damn tooth. Thanks for the reality check all you spendthrift Tooth Fairies…..and to Dwayne “The Rock” Johnson I say…..I look better in tights and wings than you do!