Your First Paycheck: Gross vs Net

What your kid learns

• Gross pay: the promise

  Gross pay is your pay before anything comes out. For hourly work, it’s hours times your hourly pay. It’s the biggest number on the stub.

• Taxes come out

  Your employer holds back tax from each paycheck. That’s called withholding. Income tax pays for shared services. Social Security pays today’s retirees, and your work earns credits for later. Medicare pays for health care, mostly for older people.

• Deductions you choose

  Some jobs let you choose deductions, like retirement saving or health insurance. They come out of your pay before it lands, too.

• Net pay: what lands

  Net pay is what’s left after taxes and deductions. It’s also called take-home pay. It’s the money you can actually plan and spend.

The story: Jade’s first paycheck

Jade sits at a kitchen table with a pretend paystub and a phone. The deposit is smaller than the pay.

1. Helper: Jade just got paid for a summer job. Let’s read the paystub together.
2. Jade: I worked 20 hours at $10 an hour. That’s $200. So why did only $160 land?
3. Helper: The top line is gross pay: $200. That’s your pay before anything comes out.
4. Helper: $30 goes to taxes, and $10 goes to a retirement savings plan Jade picked.
5. Jade: So net pay is what’s left: $160. That’s the number I can actually plan with.
6. Helper: Exactly. Plan with what lands, not what’s promised.

The game: Paystub puzzle

Sort each line of a pretend paystub. Is it gross pay, a tax, a deduction or take-home pay?

Games use pretend money and work with taps or a keyboard. Nothing is timed.

New words

gross pay

your pay before anything comes out

net pay

what lands in your account after taxes and deductions

Also called: take-home pay

withholding

tax held back from each paycheck

deduction

money taken out of your pay for something you chose, like retirement saving

Questions at the end

• Which number is bigger on a paystub?
• You’re planning what to spend. Which number do you plan with?
• Which one is a tax, not a deduction you choose?
• Pretend paystub: gross pay $300. Taxes $40. Deductions $20. What is net pay?
• What does Social Security tax do?

Remember this

Plan with what lands, not what’s promised.

Talk about it

If a job pays $10 an hour, how much do you think actually lands? Why might it be less?

Try it at home: Find gross and net

1. With a grown-up’s OK, look at a real paystub. They can cover the amounts.
2. Or make a pretend paystub on paper with Jade’s numbers: $200 gross, $30 taxes, $10 retirement saving.
3. Find gross pay, each tax line and net pay.

With a grown-up’s OK, find gross and net on a real paystub. They can cover the amounts. Or make a pretend paystub on paper with Jade’s numbers.

For grown-ups: live facts

• Social Security tax rate (employee)

  6.2%

  Taken from each paycheck up to the wage base; employers pay the same again

  As of 2026

  Source: IRS.gov(opens in a new tab)

• Medicare tax rate (employee)

  1.45%

  Taken from every paycheck; employers pay the same again

  As of 2026

  Source: IRS.gov(opens in a new tab)

• How federal income tax withholding works (Publication 15-T)

  Source: IRS(opens in a new tab)

• State income tax rules

  Source: USA.gov(opens in a new tab)

School standards

• Grades 6–8
• National Standards for Personal Financial Education: Earning Income
• Common Core Math 7.RP.A.3