Teachers, coaches, and parents might want you to be more active but having passive income is actually a good thing!
Usually, when you want to make money, or income, there is a proportional amount of work that you must do to earn a certain amount of money. For example, if you walk three dogs and charge $5 per dog, you will make $15 ($5 x 3 = $15). In order to earn $5, you will always have to put in the time to walk one dog. The same goes for working at a store: If you make $9/hour and you work for 5 hours, you’ll earn $45 ($9 x 5 = $45). You will always have to trade one hour of your time to make $9 (unless you get a raise!).
But passive income works differently. Passive income is money you earn that isn’t directly proportional to the amount of active work you do, so you’re earning money even when you aren’t working! How great does that sound?
Examples of passive income include earning interest on savings accounts, dividends (similar to interest) on shares of a company you own, lottery winnings, and rent as a landlord of a property.
Usually, to start earning passive income, you must spend money and time up front. This is a kind of investment—you are investing in something called an asset that will earn you money later on (like a house you will rent out for money each month). This asset might need some maintenance or repair as time goes on, but overall you would earn much more money than you spent, all the while you are doing other things, like hanging out with friends.
Examples of Passive Income
Do you have other ideas of how you could be earning passive income?