Hi everyone you're listening to the Money Girl Podcast.

I'm Laura Adams the author of Money Girl Smart Moves to Grow Rich, a fun and practical guide to personal finance.

Order the paper back her e-book from your favorite bookseller. You've probably heard about top employees

at big companies who get paid stock options. No matter if you're already one of

them or aspire to be one someday, you should know how these benefits work.

In this episode we'll cover two types of employee stock options you might receive

in addition to salary and other benefits.

You'll find out how stock benefits help you grow rich,

plus the huge difference in how they're taxed. An employee stock option, or ESO, is a benefit given to certain employees of a company.

Stock options give you the right to buy shares of the company's stock at a predetermined price.

It's called an option because you're never obligated to buy in. It's always your choice.

You might wonder why an employer would want to pay you with stock options

instead of simply increasing your salary or giving you a cash bonus. Well,

shareholders always want the value of their stock to rise.

So tying some or all of your compensation to the company's stock price gives you an incentive to do an outstanding job, increase profits, and help the stock appreciate.

This aligns shareholder and employee goals,

makes everyone happy in theory.

Here's an example of how a typical stock option benefit might work.

Let's say Cindy starts a new job with Acme Inc and has given 10,000 stock options as part of her compensation package.

She has to wait a set amount of time, known as a... as part or all of the

she has to wait a set amount of time,

known as a vesting period,

...