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Teaching Kids Passive Income

Several years ago I was teaching a financial literacy workshop at a middle school. There was a particular day when I taught kids how to make money while they sleep (A.K.A. passive income). When I finished teaching them about the benefits of passive income, a grade eight student raised his hand and said “Thank you for teaching us that, but I am not interested in doing any of those things. I am fine with being an employee and exchanging my time for money.”

That comment was shocking to me, but it made me realize that not everyone is interested in earning passive income or becoming financially independent. We all have different goals; adults or kids. Some kids at a very young age already have a clear vision of the life they want to live when they grow up.

I realized that regardless of our kids’ aspirations for life, it is our responsibility to teach them financial literacy and what is available to them in terms of different income streams. It is our job to present them with education and opportunities, then they can decide if they want to pursue them further.

Making money while sleeping was not a concept I was taught when I was growing up. I only learned about it in my twenties by reading books outside of the school curriculum. I wish that I was introduced to it sooner. That is why I teach it to my children and my students.

At some point when my kids get older, I want them to read the book Cashflow Quadrant by Robert Kiyosaki. If you are not familiar with the cashflow quadrant, take a look at the quadrant in the picture below. The quadrant has four squares, which represent four different ways of earning money.

The left side of the quadrant has two yellow squares. One represents employees and the

other one represents self-employed individuals. The yellow side depicts earning money by exchanging our time for it. That is called active income, because we actively work for it. If we do not work, we do not get paid. Most of us grew up learning about earning money this way. I read somewhere that 95% of the world’s population earns their money this way, and that they all own only 5% of the world’s wealth.

The right side of the quadrant has two blue squares that represent business owners and investors. This side depicts earning money through passive income streams by setting up systems and money to work for us. It is called passive income, because we do not have to exchange our time for money. We can be earning money even when we are sleeping. Only 5% of the world’s population falls into this category and they own 95% of the world’s wealth.

In all my years of schooling and even in my career, no one has ever taught me how to earn passive income or how to switch from the yellow side to the blue. I have been educated and trained to be an excellent employee and to support someone else’s dreams and goals; to support their quest for financial freedom. I was not trained on how to pursue my own financial independence and build passive streams of income.

Passive income is all about working smarter not harder. When I was growing up I was raised to work hard, to give it my all and to be proud of my work. While all of these things are important, only later on in my life I realized that working smart is just as important as working hard, if not more important. I wish someone pointed that out to me when I was younger. To create passive income we still have to put the effort in, but at least that effort keeps paying off continuously in the future. It is better than exchanging time for money when we only get paid once for our efforts.

I am not trying to toot my own horn here, but it outrages me when I think, how is it possible that I have never been educated about creating passive streams of income until I started learning on my own? I have a Rotman Commerce degree from University of Toronto, which is a very prestigious degree. I am a CPA, with two decades of experience in audit, tax accounting, bookkeeping and I was a CFO of a private school. Many may think that passive income is second nature to me. Nope! I had to learn about it all on my own. Guess what? I am still learning and educating myself, because there is so much to learn, and I want to pass on as much knowledge as I can to my own children and my students.

If you are wondering how I am teaching passive income to my kids and students, here are four examples.


I have been investing for my kids and teaching them how to invest for many years now. We have invested in index funds and ETFs for the long term. We also invested in some individual stocks of companies that my kids know and understand such as Apple, Disney, etc. Some of these investments pay us quarterly dividends (which is a form of passive income). We do not cash these dividends out. We reinvest them by buying more shares. For more details on how we invest, check out this blog post.

My goal is for my children to benefit from the time horizon that they have ahead of them and the magic of compound interest. I hope that by investing regularly on their behalf, we can build up a nice investment portfolio for them, which can grow and be worth millions of dollars in the next few decades.

I am investing on behalf of my kids now, and will stop when they are eighteen years of age. If at that point in time, they choose to continue to invest on their own, they will make me proud. However, as a parent, I am setting up a nice nest egg for them. I am teaching them to never touch that original investment, and if they need money to only use the interest generated by the original investment. Based on my calculations, if we stop investing on their behalf at age 18 and if they do not pull any money out, but keep reinvesting the interest, they can be millionaires when they are middle age.

I have also invested a very small amount on their behalf in Bitcoin. That is the only cryptocurrency investment that they own at the moment. I am still learning about cryptocurrency and I never invest in anything that I do not understand. I had my reasons for investing in Bitcoin, and I will share that in another post, as for the other crypto, I need to learn about it more before I buy it.

I also want to learn more about NFTs, and decide if this is something that my family would be interested in investing in.

While I am investing on my kids behalf and learning about crypto and NFTs, I try to pass on that knowledge to my kids and other families through my Wealthy Kids Investment Club, where I detail steps of how I invest. You can check it out here.

Real Estate

I learned about real estate investing serendipitously. When my husband and I bought our first home, we both had jobs that paid low salaries, and we realized that the only way we were going to make ends meet was to rent out the basement of our home. Even later on, as we obtained better jobs and our financial situation improved, we kept our tenants, because we realized that they were helping us pay off our mortgage faster and were assisting us in reaching financial freedom. We ended up purchasing another property and there was a point when we were receiving rental income from three different units. This was not exactly passive income, as we still had to do some work and be there for the tenants, but it was easier than working at a 9 to 5 job.

Our hope is that one day when our kids are doing their post secondary education, we buy a property near their school, which we would turn into rental units for students. The plan is for our child to live in one of the units, while the other ones are rented and the rent income pays for part of the mortgage and the other bills. We plan to task our child with responsibility for collecting the rent, doing the accounting and dealing with the tenants. This would be their official training, so that one day they can invest and manage real estate on their own.

Digital products

I know that a lot of people, especially young people, do not have capital to start investing in the stock market or real estate. There are other ways for them to earn passive income. If they can not invest money, they can invest time to build passive streams of income with creation of digital products.

Digital products are fun to create and an easy way to earn money. The start up costs are very low and anyone can do it with persistence and effort.

I am trying to set a good example for my kids and show them that passive income can be earned when we create intellectual digital property that helps others. I have created online courses that help parents develop their personal money teaching plan based on their unique family values. You can check them out here. I purposefully make a point to share with my kids how much money is deposited into my bank account every few weeks from the sales of these courses. I explain to them that I have done the work once, but the effort keeps paying over and over. I also explain that expertise is very important when developing intellectual property. To develop those courses I have used the knowledge that I have as a CPA, as well as the experience of teaching kids and parents financial literacy for almost ten years.

At the same time I do not want to discourage my kids from creating a digital product as they are young and do not have a lot of experience. I also explain to them that they do not need to be doing something for a decade in order to earn passive income from digital property. If they have information or skills that can benefit others, they can still monetize it. They do not necessarily need to create a digital course, a workbook or a book, but instead they can sell stock photography online, art work, designs, etc.

I also like to use examples of video games and phone app games to teach my kids about passive income creation through the digital world. For those of you who do not know what skins are, those are different outfits that video game characters wear in the game. Sometimes my kids spend their money in order to buy a new skin, a weapon or a vehicle for their video game. I explain to them that a video game programmer coded that skin or accessories once, and keeps getting paid for that work over and over again.


One of the ways of creating passive income is through entrepreneurship. I teach kids that entrepreneurs identify problems and discover solutions to those problems. They build systems and processes to deliver those solutions to their customers. If the entrepreneurs can accomplish building all that without their direct involvement, they are true masters of creation of passive income.

I have huge respect for entrepreneurs who can create a solution that serves many people, while simultaneously eliminating themselves from the entrepreneurship system and still earn money. That takes skill and experience, and it is a great example of passive income creation.

We parents can provide our children with opportunities to learn those skills and experiences by helping them setting up small entrepreneurship ventures such as lemonade stands, bake sales, etc. Our kids can learn from those experiences and decide for themselves if this is something that they want to pursue further. When I was a child, I never had an opportunity to do or even see any of this in action. Therefore I am determined to provide my children with these opportunities.

I know that helping children start their own business ventures takes a lot of work on behalf of parents. Despite that, I will be starting a small venture with my daughter and I will let you know the details of it once it is underway. For me, this project is not about how much money my daughter will earn, but it is more about the skills and knowledge that she will gain as the result of it.

About a year ago, I interviewed Brian Weisfeld, the co-author of The Startup Squad, which is a kids’ book series on entrepreneurship that I highly recommend. Brian and I discussed the benefits of teaching kids entrepreneurship, because it helps them develop life skills such as negotiation, risk tolerance, failure acceptance, prioritizing, sales and marketing, recognizing opportunities, and so on. If you want to check out my interview with Brian, here is the link.

I am curious how you feel about kids and entrepreneurship? Let me know if you have ever assisted your child in their entrepreneurial endeavors and how that went.

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