Ever feel like you’re not earning enough money at your job? Or do you want that extra financial cushion, but have little or no time for a side hustle? If either of these sounds like you, then you’re likely to benefit from a passive income stream. Passive income refers to money that is earned from sources other than your regular income as an employee. The difference between working a job and earning passive income is that the latter does not require a lot of time or effort—hence, “passive,” as opposed to “active.”
However, passive income sources typically involve an initial investment, whether in the form of money or through time and effort exerted toward the development of a product. Once this investment has been made, though, all you have to do is let it out in the wild, so to speak, and reap the earnings from there.
In this article, let’s explore the types of passive income sources that can help you grow your money. From familiar financial investments and real estate to newer digital products, here are some forms of passive income that you can explore:
1) High-Yield Savings Accounts and Time Deposits
A high-yield savings account remains among the safest financial investments you can make with the goal of earning passive income. With a high-yield savings account like that of Maya Savings, which comes with interest rates of up to 15% p.a., all you have to do is to deposit your money and leave it alone so that it can accrue interest over time.
As the term suggests, these types of accounts offer interest rates that are higher than those from conventional savings accounts. Another iteration is a time deposit account, which can accrue and compound more interest the longer the initial deposit is left undrawn. Maya Bank’s Time Deposit Plus program allows users to open up to five active time deposit accounts and manage amounts as small as PHP 5,000 for three-month, six-month, or twelve-month periods, with a chance to earn up to 5.75% p.a. Try accessible and convenient options like high-yield savings accounts and time deposits to easily start earning passive income.
2) Dividend-Paying Stocks
Dividends are payments you can receive from stocks that you’ve invested in. Not all stocks pay out dividends, but there are companies that give dividends to shareholders when they perform well. Investing in dividend-paying stocks is an opportunity to earn a steady income through regular payments, as long as you look for companies that are financially stable, well-established, and have a history of paying dividends. Another tip is to buy stocks from different sectors and industries to be able to build a diversified portfolio.
Once you’ve earned dividends, you can easily withdraw the money for whatever purpose. But it’s also advisable to reinvest your dividends to take advantage of compounding earnings over time. Be aware, however, that investing in dividend-paying stocks (or all stocks, for that matter) is relatively riskier than other financial investments, as this method still involves market volatility and unpredictability. This kind of investment also requires research and regular monitoring to make sure you’re investing in the right companies and to see if there’s a need to adjust your approach depending on the state of the market.
3) Retail Treasury Bonds (RTBs)
Thanks to their lower risk compared to stocks and potential for capital preservation, retail treasury bonds (RTBs) are a good option for those who are just beginning to explore different passive income sources. Treasury bonds (T-bonds) are debt securities with maturities ranging from 2 years to 25 years and are aimed at institutional investors. Meanwhile, RTBs, T-bonds’ smaller-scale counterparts, are targeted toward individual investors seeking a safe, accessible, and steady passive income source.
Both T-bonds and RTBs are considered relatively low-risk because the principal and the interest are guaranteed by the national government. As the more accessible option between the two, RTBs offer a lower minimum investment amount (often as low as PHP 5,000) and have shorter maturity durations (e.g., 3, 5, or 10 years) than T-bonds. You can avail of RTBs through authorized selling agents such as banks and other financial institutions during the offering period.
4) Unit Investment Trust Funds (UITFs)
A unit investment trust fund (UITF) is a collective investment scheme where funds are pooled from different investors that have similar investment objectives. With UITFs, you’ll allow the bank to invest your money in a portfolio with various assets and rely on professional fund managers to manage your investment.
Take note that investing in UITFs comes with varying degrees of risk depending on the particular UITF. Also, bear in mind that while UITFs in the Philippines are regulated by the Bangko Sentral ng Pilipinas to ensure transparency and proper fund management, they are not covered by the Philippine Deposit Insurance Corporation (PDIC).
5) Rental Properties
Rentals can be a long-term source of passive income, but the high earning potential of any rental comes with the responsibility of property ownership and maintenance. Buying property involves a significant upfront cost, but if you have the means and are willing to further invest in upkeep, renting can be a lucrative passive income option for you. Choose between short-term and long-term rentals depending on your property’s location, type, and size.
Despite being considered a passive income stream, renting out property requires a higher level of involvement compared to other sources discussed here. Maintenance, legal compliance, vacancies, and problems with tenants are among the challenges of this type of investment. But as long as you are willing to handle all of those, rentals also remain one of the most rewarding passive income options you can try today.
6) Digital Products, Intellectual Property, and Technology
Now that we’re firmly in the digital age, there are numerous opportunities for people with various skills to earn passive income. Creating digital products like e-books, printables, music, digital art, videos, and online courses can help you generate passive income while leveraging your talents and expertise. Depending on the type of product, you can earn through royalties, sales, licensing, or ad revenue.
If you’re technically adept, you can also try your hand at developing a mobile app. Mobile apps can generate significant income through sales or ads. However, with the countless apps available, standing out in this highly competitive market can be a struggle. In addition, apps need continuous updates and maintenance that require your time and commitment, which means that your involvement may not always be completely passive, so to speak.
The downside with both digital products and mobile apps is that you can’t really expect a steady stream of passive income since earnings from these products can be extremely variable. You will still need to put in the time to market your products and your skills to be able to maximize your earnings from month to month.
Despite the initial effort to get it off the ground, having at least one reliable source of passive income will make it easier to deal with the worry of unexpected expenses and costly emergencies. The funds will also afford you the security of having a bit of extra for that trip, car, or new gadget you’ve been eyeing for a while.
More importantly, having a passive income stream helps you prepare for the future, whether that’s a dream wedding, your child’s education, early financial independence, or a comfortable retirement. Just remember to adjust your approach to earning passive income and always practice due diligence, especially with riskier investment methods, so that you don’t end up losing your hard-earned money instead.
Also Read: California to offer Free Health Care to Low-Income Immigrants
