What is Passive Income

Wouldn’t you just love to earn money whilst you sleep? Wouldn’t we all?! This is the benefit of a passive income. Passive income is any money that you earn without actually putting in much effort past an initial stage. For example, you could deposit money in a savings account, it would earn interest, but you haven’t done anything other than deposit the money, so the interest that keeps coming into your account is a type of passive income. Think about it for a moment, if you could earn hundreds or thousands of dollars passively, leaving you to more free time for yourself, your family and friends and to work at what you really love to do.

Depositing money and earning the interest is possibly the easiest form of passive income, you don’t have to put in much effort, other than perhaps to find a good deal on a savings account and making sure it’s still good every so often. Once you have done this, the money will earn interest and then continue to do so until you withdraw it. The best thing about this type of passive income, is that you will also earn compound interest, that is interest upon your interest. So for example, put in $100 to your savings account. You will earn $105 after a year for a 5% interest rate. But instead of earning $5 again the following year, you will earn $5.25 because it will be $105 adding 5% interest. The downside to this form of passive income, is that you need money to start with and you couldn’t really live off the interest unless you had a massive amount saved.

One great way to earn passive income is by royalties. Everybody has a creative talent, be it photography, writing, music etc. Selling photos to a stock image company or writing a book are excellent ways of earning passive income. Creative works keep on working when you have long finished them! You get to do something creative that you love doing and you get paid for it! This is how musicians and writers often earn a bulk of their money.

Passive income is a bit like planting a seed. You put in some initial effort, you water it every so often, the seed flourishes and it produces a crop. You receive much more back from a small initial deposit. An apple tree starts from planting one tiny seed and in time, it produces an abundance of apples. Just don’t expect everything all at once, passive income takes time but you can do it throughout your life whilst you’re working, studying or raising children and in time it will reap rewards.