How are you paid? And why it matters

Having early exposure to the workforce is essential to understanding different career paths and the many different ways children will be able to earn once they are adults. That includes understanding how you are paid right now. Talking to your kids about money by exposing them to your work will pay huge dividends.

Why is it essential to have an understanding of different payment methods? We can sometimes get myopic in our thinking. We work and earn money, and it is easy to forget about all the other ways people work to earn their living. To earn a living, we need to add value by offering our skills+effort+time to make money from working. What is less obvious is that there are many ways to combine and emphasize each element.

What is the Difference?

Is there a difference between how a psychiatrist or a telemarketer earns a living? More specifically, how do the two professions gain access to money? What about a would-be actor versus a software developer. At first glance, you may think the struggling actor and telemarketer are more alike. Same with the developer and layers. But are they? Who has more in common with who?

While the amounts of money that the different professions could earn may differ a lot, the way they make money is very much the same.
Let’s take the psychiatrists and telemarketers. These professions track time spent working as part of their trade for money. If the telemarketer puts in overtime, they get a bigger paycheck. That is the same for a psychiatrist who may charge a client by the hour. If the psychiatrist takes on more clients and put in more hours, they can get more money. Yes, their hourly rates are vastly different, but they both need to work more hours to get more pay. Depending on their skills and the going hourly rate, they both have an upper limit on their income based on the number of hours they can work in a given day.

Now let’s look at the other two professions; the actor and a developer who owns what they produce. They both work on a project basis. They may get paid to work on the project. It is also possible that they don’t get paid to complete the project. They both get paid based on how well the project is received. The more value the project offers, the more money it can potentially make. They take on more risk upfront but can earn money if the project is successful.

Paradigm Shifting

Consider how technology disrupters use their innovations to change the payment paradigm. For example, rather than renting movies a la carte, Netflix gave us a subscription. Rather than seeking roommates or long-term tenants, we can rent rooms Air B&B style. Likewise, exposing our children to work can help to change how they think about being paid.

When opportunities arise for our first jobs or when we talk to our children about working, don’t forget to break down how we get paid. For example, when your kids are negotiating their first jobs, ask them if they will be asking for a lump sum payment once the driveway is shovelled or are they going to ask for an hourly rate. Should they be paid per walk of the dog, or is it a weekly subscription? Is that babysitting rate by the hour, and does that rate go up based on the number of kids?

That early exposure to the workforce and payment methods will open up your child’s mind to the opportunities ahead of them. You can encourage that by sharing your work experiences with them, helping them see all the different ways they can combine skills+effort+time with earning a living.