Image courtesy of Denise Cheng
Image courtesy of Denise Cheng

Passive income is when we can get income without working. This may sound impossible but it includes things like savings interest, returns on investments, rental income and things like this. Again these may feel like they do not apply to you, but you may be surprised at how much money you could possibly make in passive income.

Passive income by definition may be money that you do not have to work for, but in reality you have to work initially and then hopefully you can sit back and let the money come in. However, some types are more passive than others!

If you have some money saved up, then the interest that you are getting form having it in a bank will be passive income. Most people have this or have had it in the past, but it is not normally a significant amount of money. In fact with interest rates being so long, it can be difficult to find anywhere that pays more than 1%. However, this is usually a safe place for your money and gives you some return.

If you are prepared to tie your money up for longer and take a bit more risk then investments may be a better option. These include stocks and shares, pensions and investment funds and tend to give a better return in the long run. You can usually choose how much risk you are prepared to take and you can get a better return generally, as long as you choose wisely and invest long term.

A pension fund is a way to get a passive income in your retirement. By investing while you are working then you will be able to get an income when you stop work. Some of these are better than others and so it is worth taking financial advice to see which might be the best for you, if one is recommended at all. The pluses are that you will have some money each month through your retirement but if you die young or choose the wring scheme you may not get back as much as you put in.

These days a lot of people are investing in property to get passive income. Buying homes and then renting them out can create an income that could build up to be quite significant. If you have to use a mortgage to buy the property then it will not be such a good deal as you will need to make the monthly repayments as well as covering the maintenance costs on the house. If you can buy with a lump sum, even if that means making a partnership with other people, this can keep the costs down and mean that more of the rental income will be able to taken out as profit.

Another way to get a passive income is to produce something, like a piece of music, book or app and then put it up for sale and collect the royalties. You will need to put work in to start with regards to producing it as well as promoting it, but you could find that once it gets going you will be able to just sit back and collect the money without putting in any more work.