Types of Pay

Types of Pay

If your teen gets a job at the local restaurant or retail store, they’ll quickly learn the excitement of getting paid. You can help your kid prepare for their first job by teaching them how different types of pay will affect their income. If your child wants to be a chef, they’ll likely work for an hourly wage. If you’re raising a future teacher or doctor, they’ll earn a salary no matter how many hours they work.

Different types of pay

Help your child understand how different types of pay will impact their budget and money habits. Your kid can practice good habits and learn how income works along the way. Talk to them about how to budget for their paycheck and set goals for how they want to earn money down the road.

Hourly wage

An hourly wage is an agreed-upon rate per hour an employer pays an employee. Your hourly wage is set when you get a job and you get a paycheck on a regular basis. Your child might be surprised to find taxes are taken out of their paycheck, so explain how money gets deducted from each check. Hourly wage employees can also earn special wage rates for overtime or paid time off.


For many kids entering the workforce, minimum wage will be their hourly pay. Minimum wage is set federally at $7.25 per hour for employees, but many areas have a higher minimum hourly rate.


If your child finds a career, they’ll likely get paid a salary. An easy way to explain the difference between an hourly wage and a salary is that a salary pays you the same amount of money no matter how many hours you work. An hourly wage pays you for as much time as you spend working. Many salary positions come with perks like health benefits and a career path toward a better salary and job in the future. 

Commissions and bonuses

Some jobs, like sales, will pay you a certain amount of money when you meet a goal, called commissions. For example, you might earn a percentage of a sale in commissions every time you sell a TV. Jobs can also offer bonuses for anything from holidays to outstanding work. Some are set bonuses, while others can be earned or received randomly.

Contract, freelance, and self-employed types of pay

If your child is entrepreneurial, they may want to make money as a business owner or contract worker. If so, they’ll need to understand pay works a little differently. While you can set your own rates and hours as an entrepreneur, you’ll also need to plan for taxes and other financial responsibilities. Entrepreneurs don’t make a regular paycheck, so talk to your child about ways to budget and plan their money around their income.


Read more articles about explaining earning here


Written by Kristin Yarbrough Published Jul 5, 2022 ● 3 min. read