3 Ways to Earn More Money - Helping Your Child Understand the Relationship Between Income and Expenses
We’ve talked about savings in the past few posts, focusing on teaching kids to automate their savings, explaining inflation to your child and how to teach your kids about investing.
Now we’re going to talk a bit about earning. Because before your child (or any of us) can save and invest, he or she has to have enough money to cover his or her basic expenses and have extra money left over!
When you talk to your child about the idea of having more income (money you earn) than expenses (money you spend), a great visual is to hold both hands out, palms up.
Explain that there are two ways to create that “extra” money: you can lower your expenses (lowering one hand) or you can make more money (raise your other hand). The larger the space between your top and bottom hand, the more “extra” money you create. When you do both, you increase your odds of having enugh left over to save, invest, and spend as you wish—not just to cover your bills.
We read a lot about lowering expenses: don’t drive through your favorite coffee shop every day, take lunch to work, and watch every penny. These are worthy ideas. You can enlist your kids’ help to think about ways your family can creatively save money and talk about the savings.
You could plan and prepare a special dinner, for example, and then compare the cost of the groceries to what a similar meal would’ve cost in a restaurant. Practical examples like this one help kids understand how small choices can lead to significant savings.
While cutting costs is fantastic, you can only cut so much. You still have to cover fixed costs, like rent, groceries, and utilities.
So, ask your kids – if we’ve pared expenses as much as possible, how do we come up with more money? The answer – we earn it.
Having enough money to save and invest isn’t a one-sided solution. In addition to cutting expenses, you can increase your income, boosting your chance of success.
3 Ways to Create More Income
1. Your “Regular” Job. Whether you’re a salaried or hourly employee, whether you work daytime hours or the night shift, your child likely understands that you go to work to earn money to pay for the things you need—your home and car, as well as their toys and food, for example. (Establishing a Family Economy is a great way to help your child internalize these concepts.)
The quickest way to raise your income in your regular job is to produce excellent results, document the ways in which you help the company thrive, and to ask for a raise. Producing those results may take a while though. (In the meantime, we’ll discuss other ways to bump your income in points 2 and 3.)
If your kids have a job, like mowing the neighbor’s lawn, you can use their performance there as an example.
The first summer, if they do a sufficient job, mowing the grass but perhaps leaving clipping on the sidewalk or not edging, they will earn their money and might be rehired the following year. But they’ll have little justification for requesting a higher rate the following summer.
However, if they exceed every expectation, thrilling the homeowner with their work ethic and attention to detail, they significantly increase their chances of earning a bit more for the same job next summer.
2. Side Hustle. In addition to their regular job, your child can join the gig economy to increase income (as can you!). Brainstorm with your child creative ways they could make extra money in their downtime.
Start by considering what they’re good at, what they’ve studied or learned, and how they can help people with that skill or knowledge. Maybe they can tutor younger students or peers in Algebra, as my friend’s son did, teach English or Spanish, or even help kids develop soccer skills or shoot better free throws.
I recently read the book “100 Side Hustles: Unexpected Ideas for Making Extra Money Without Quitting Your Day Job” by Chris Guillebeau. This gem was filled with creative ways to make extra income, from being an urban tour guide to founding a travel website. The idea is to focus on your particular strengths and unique knowledge or skills and tap into a demographic that will pay them to learn about or purchase it.
3. Passive income. I love the idea of passive income because it’s a way you can bring in additional money while you’re doing your “regular” job! This is a product or service that takes time to set up initially, but that you don’t have to keep putting energy into in order for it to create income.
For example, it might be some sort of research you’ve done that you can sell or a pre-recorded workshop that people can buy. I have an acquaintance who got a perfect score on the SAT. Subsequently, to bring in extra income, he pre-recorded SAT prep tutoring lessons. While the recordings took time and effort up front, once he was done, the work was done—after that he simply made money every time someone downloaded the lessons.
Remind your kids that things change and income does, too. They may leave one “regular” job (like mowing the lawn) for another that pays more (perhaps cutting grass for the Township). Or their “regular” job may end because their employer (your neighbor) decides to hire a service, in which case they’ll need to look for another “regular” job.
Regardless of the changes they experience, your child may or may not continue their side hustle or passive income. Nothing is set in stone, but everything they’re interested in pursuing is worth trying for a while.
The point of all of it: lower expenses and raise income. Why do we want kids to learn about this simple but important concept early on? Because understanding both sides of this equation is what enables people to widen the gap between what’s coming in and what’s going out.
When you accomplish that feat, you’re not surviving, you’re thriving and who doesn’t want that for their child?
When your kids learn and apply this concept, instead of living paycheck to paycheck, they’ll have money to save, money to invest, and even money to treat themselves to something special. And that makes any parent feel good!