My eldest is 11 years old and when people ask her what she wants to be when she is older she tells them "I want to be a teacher!".
Sadly, a common response from the adults who hear this is "There's not much money in teaching!".
As you can imagine, this response isn't what my daughter wants to hear. Essentially, people are telling her that she shouldn't become a teacher because of money.
As my daughter is only 11, there is no saying what she'll do to earn money when she is older but for me, I hope that she does something she wants to do and is not just driven by the salary it attracts.
The reason I am OK with her not choosing a job based solely on earning potential is that I believe (and hope) that she'll know how to manage her money and see her wealth grow over time.
Let me expand on this.
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Not relying on a single source of income
For many people, their salary is their only source of income. This is why so many people care about which job they pursue.
For my daughters, I want them to have many different sources of income. They are already generating some income from the money they have saved and invested.
One of the modules in the new program I've created for schools focuses on different ways to earn money.
In this module, there are two people, one is a highly-paid lawyer who likes to spend. The other is a dentist who manages to save/invest 10% of her salary and has a side hustle of owning vending machines.
As the students learn about these different sources of income they realise that the dentist (Chloe) becomes materially better off financially over time, despite her lower salary.
This is not to put the students off desiring high-paid careers. It's to highlight that their careers should only be one part of their financial journey.
Note: If you believe your school should be doing more to help kids learn about money, please send them this link which provides more information about our Money Management Program for Secondary Schools
Different Sources of Income
I believe all kids should understand that there are three broad categories when it comes to generating income.
Job / Careers - Working for others
Entrepreneur / Side-Hustle - Working for yourself
Passive Income - Your money working for you
As mentioned above, most people rely solely on their jobs/careers to earn money. More needs to be done to help kids learn about the other two categories.
Entrepreneur / Side-Hustle - Working for yourself
When people hear the term 'entrepreneur, they think of big names such as Elon Musk or Jeff Bezos. However, being an entrepreneur doesn't just mean running a massive company.
Being an entrepreneur can mean having a side hustle which generates extra income. For example, writing books, buying/selling on the Facebook marketplace, tutoring, owning a vending machine or photography.
These might not generate vast sums of income but small amounts add up over time. Plus, these side hustles can help develop skills and interest which can lead to generating more income over time.
For my daughters, I would encourage them to explore many different side hustles over time. In fact, when they are older, I would hope that they look to develop one new source of income each year. It might mean that some initiatives don't lead to much but they might discover one that really takes off.
If you would like to discuss this topic further with your kids, then I recommend reading my blog: 5 mini-business ideas for kids
Passive Income - Your money working for you
Passive income is money that you generate when you put the money you don't spend (savings) to work.
My daughters invest some of their savings. Each month, they can see that their investments are generating them money without them having to do any work.
At the moment, the amount is small but each month it is getting bigger and bigger. They are motivated to keep savings so that the amount they generate increases.
There are many different sources of passive income. The one that I like the most is investing in the stock market. I've written about this in many of my blogs.
Recommended reading: How to teach your kids about the Stock Market
There are other sources of passive income such as high-interest bank accounts, real estate (for adults) and royalties (owning the rights to music, films or books).
Each of these generates a bit of income with limited extra work.
The challenge with passive income is that the amount generated always seems so small and therefore insignificant at the start. As a result, people don't persist with it. Those who do persist, however, experience the magic of 'compound interest', i.e., the amount you earn getting bigger and bigger in each future year.
This is why it is so important to help your kids set up a high-interest savings account or, better still, an investment account when they are young so there is plenty of time for their money to grow. If you haven't invested before, check out our Investing FAQ here
Recommended reading: How to teach your kids about Compound Interest
I showed my daughter, who currently wants to become a teacher, this video. It is an interview with a teacher who saved and used passive income to become a millionaire (he has now written a book about it which is a further source of income for him!)
Summary - Earning money in different ways
If you help your children learn that there are many different ways to earn money, they will have a massive advantage in life.
Not only will this help them build their wealth, but also provide them with additional financial security should they want or need to take time off full-time work in the future.
For more tips on how to teach your kids about money, subscribe to my blog here or check out our online course.
What to read next? Debt 101: A Case Study For Kids
Thanks for reading!
Will
P.S., If you want to teach your kids about earning money in different ways, grab them a copy of my best-selling book, Grandpa's Fortune Fables. Available on Amazon
