Wish you could earn money while you sleep? With these passive-income ideas, you can make that dream a reality.
What Is Passive Income—And How Can You Earn Easy Money Now?
Updated on May 28, 2025
Gone are the days when making money required punching a clock. These days, it’s the dream to pull in cash while you sleep, or take a vacation while your business runs itself. Passive income makes all this and more possible. But what is passive income, exactly, and is it only for people who are already wealthy?
“When people think of passive income, they [often] think of real estate or investing,” says Niki Puls, a Nebraska-based passive-income mentor who became famous in 2023 for passively earning $120,000 in 9 months. But there are so many other ways to make passive income work for you. Now the CEO of her own company, Slow Living Simplified, Puls teaches others how to make money fast and says “it’s definitely possible for stay-at-home moms and people who don’t have a lot of time.”
According to a 2024 Financial Wellness Survey by the First National Bank of Omaha, 53% of Americans have at least one source of passive income. That’s a significant jump from the 20% reported by the U.S. Census Bureau just a few years ago. Ready to get started? Reader’s Digest brings you advice from six top passive-income experts to help you earn money for expenses, savings and even retirement! Keep reading to learn how you can start racking up the big bucks.
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What is passive income, exactly?
There’s not a single passive income definition, but basically it’s work that runs itself. “Passive income is income that takes little effort to generate compared to active income, and it’s money you earn outside of a traditional employer or contractor,” says Courtney Alev, a senior director of product management at Credit Karma.
One way to think of passive income is whether the money would come in if you weren’t around to oversee it. Steve Davis, founder and CEO of Total Wealth Academy, once owned 4,000 rental units—but he never had a key to any of them, and he never saw them in person. Instead, he let others manage them while he cashed in.
That’s a true passive-income stream, and real estate isn’t the only way to do it.
Is passive income the same as a side hustle?
No. A side hustle is more like a second job—one you can do in addition to your full-time work. Side hustles are a way to generate more income “on the side” to supplement your full-time job. They aren’t usually lucrative enough to replace your full-time work, but some people manage to turn their side hustles into full-blown careers (if that’s the goal).
Passive income is similar to a side hustle, in that the income it generates supplements your full-time work. But the key difference is how much time and attention it takes to keep it going. Ideally, passive-income streams operate in the background, with minimal effort once you’ve done the work to set them up. With passive income, you can literally make money in your sleep, whereas side hustles require hands-on work on a regular basis.
What are the benefits of passive income?
There are many, and they all have to do with spending less time working and more time enjoying life. For many people, it frees up time and helps them to become financially independent, and as a result, they end up happier at home.
Here are some concrete benefits of passive income:
Provides financial freedom
This is the big one. “If you’re able to budget for all your normal expenses with your primary salary, anything additional you earn can go straight into savings for your goal,” Alev says. The sky’s the limit: You can save for retirement, pay off your house and car, take vacations or send your kids to schools you might not have been able to afford.
And if you play your cards right, you can back off the initial hustle of getting your business set up. It might even become your full time job! People who are “lucky enough to get their source of passive income working like a well-oiled machine, it’s money you’re earning with minimal effort,” Alev says.
Allows you to spend more time with family
Puls was working a regular 9-to-5 job before she started earning money on the side. “Before passive income, I would only see [my family] for a few hours a day,” she says. She started by writing an ebook about intentional living, teaching other moms how to slow down and prioritize their families. She soon expanded into other books, courses, templates and social media. That 9-to-5 job? Now it’s 5 hours a week!
Provides stability
Davis says having multiple income streams protects his clients from job losses and market downturns. As of March 2025, 7.1 million Americans were without work. That’s an all-time low number, but consider that just 5 years ago during the COVID-19 pandemic, 49.8 million Americans reported not being able to work or working fewer hours.
Would you be able to survive a recession, housing crisis or downturn? Passive income gives you a sense of control and stability, and provides at least some insulation from major market fluctuations.
Frees time to pursue passions
Maybe you’re already wealthy, or you live simply. Passive-income streams allow you to pursue dreams that have nothing to do with work. Maybe you’ve always wanted to learn to paint, or ski, or travel the world. Perhaps you have a soft spot for animals and you want to spend time volunteering at the local animal shelter or mentor others in your profession. Passion projects take time and money, and generating passive income helps with both.
How much money can you make through passive income?
There really is no cap when it comes to passive income. Puls didn’t expect to make a ton of money when she first got started, but soon she had outpaced her salary. The bottom line: You could make a few extra dollars a month, a few thousand or a few million. It really boils down to what you’re doing and how successful you are at it.
For example, blogging and affiliate marketing can bring in great money, but real estate can generate a lot more, Davis says. And the best part about passive income is that it requires so little ongoing work that you can easily set up multiple passive-income streams to increase your earning potential.
What are some common types of passive-income streams?
So now you know what passive income is. The next logical question, of course, is: How can I make this kind of money for myself? For some types of passive-income ventures, you need money to make money. But there are plenty of options where this isn’t necessary. Just keep in mind that there is a ramp-up period, and you may have to learn to walk, so to speak, before you can run.
1. Real estate
For this passive-income stream, you’ll need an upfront investment for the property. From there, many investors pay a company to find tenants and manage the property. If you go this route, chances are you’ll be checking in on your properties on a weekly or monthly basis and dealing only with major problems, such as repairs or missed rent payments. Other owners are more active, and that designation matters to the IRS. If you go the real estate route, talk to a financial planner for advice.
2. Blogging
Blogging offers tons of ways to make passive income through sponsorships and affiliate marketing. “I earn affiliate income by placing referral links on my blog to products that I recommend,” explains Michelle Schroeder-Gardner, the founder and CEO of Making Sense of Cents. “If someone purchases the product through my link, I then earn a commission from the company. For example, I may link to a book from Amazon on my blog.”
Just keep in mind that you’ll need to do a lot of work upfront, including building your site, channel or platform, and growing your audience. “The income from affiliate marketing can vary greatly,” says Adrian Tamminga, co-founder and business manager at Iron Embers fire pits. “It depends on factors like the size and engagement level of your audience, the products you promote and the commission rate.”
3. Downloadable digital products
The internet has made it possible for anyone to sell a product online to a buyer without ever physically exchanging goods. Downloadable digital products include everything from meal-prep templates to downloadable art, wedding invitations and custom party decorations. You’ll find loads of these on Etsy, though that’s just one venue for selling these items.
“You create the product, and then you can sell it an unlimited amount of times because customers are either printing or downloading the product to their computer,” says Schroeder-Gardner. “You don’t have to ship a thing.”
4. Online course creation
Both Puls and Schroeder-Gardner have had success in this arena. Once you set up the course, customers pay to access it on their own time. Just be aware that you’ll have to do a significant amount of work upfront before you start counting your Benjamins.
“Creating a course is not the easiest of these passive-income ideas, but it can be a great way to earn an income around the clock,” Schroeder-Gardner writes on her site. “Most of the work is done in the very beginning, and then there is some maintenance along the way to keep the course updated, help students and so on.”
5. Dividend stocks
With a regular growth stock, you can’t make money until you sell. With dividend stocks, you’ll get payments through regular distributions the company pays to its shareholders, without having to sell the stock. “In plain English, when you buy dividend stocks, you’re buying a small piece of a company,” says Tamminga. “As the company makes a profit, it shares a portion of that profit with its shareholders, which is you. These payments are called dividends.”
To get started, you’ll need a brokerage account, which you can set up with an online broker who will place trades for you. You can also invest in these stocks on your own, if you don’t want to pay a financial planner to help you. “You can definitely do it yourself,” Tamminga says, “but it’s essential to do your research and understand the company and the industry you’re investing in.”
6. Cryptocurrency staking
An increasingly popular way to generate passive income in 2025, cryptocurrency staking is crypto’s own take on fixed-income assets. It involves staking (or locking) your crypto tokens for a fixed period to earn a reward. (If you don’t know much about crypto, now’s the time to check in with a financial planner.)
If you’re looking to stake your cryptocurrency for passive income, make sure you thoroughly understand how the process works and what the risks are. This includes knowing what the earning potential is, how long your tokens might be locked up and when payouts may happen. Crypto prices may also fluctuate, leading to your staked tokens and rewards losing value.
7. Ebooks
Self-publishing an ebook is another long-term way to make money passively. Even better? Unlike writing a full-blown novel, ebooks can be short pamphlets explaining a skill set you’re already well versed in. Plus, Alev points out, “you don’t need any physical inventory, and you don’t need to worry about shipping costs.”
Aside from actually writing the book, however, you’ll also need to advertise.
8. Car rentals
Platforms such as Getaround and Turo let you rent your vehicle anywhere from a few days to a few months. According to Turo, their car owners make about $8,832 a year ($736 a month) on average renting a single vehicle on the side. And Turo hosts (as they’re called) also have available to them a selection of host protection plans providing up to $750,000 in third-party liability insurance. This allows hosts to freely rent their vehicles without having to worry about covering potential accident costs.
9. High-yield savings
Are you building up your nest egg? That’s good, but it would be even better if you moved your funds to an account that will do a little more work for you. “Certain banks and financial services companies will pay you just for having cash there,” says Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors.
How does this translate into real-world math? If you put $1,000 into a regular savings account, you might grow it an additional 10 cents after a year. A high-yield savings account might go up $5. (This is one of those passive-income streams that works best with larger chunks of money.)
And here’s another bonus, according to Tamminga: “While the earnings from a high-yield savings account might not seem as substantial as other passive-income sources, they offer a lower risk level and provide a secure way to grow your savings.”
10. Peer-to-peer lending
Loaning money to either individuals or small businesses through platforms like Prosper and LendingClub can help you earn a higher interest than placing that money in a savings account. Of course, this carries more risk than other passive-income avenues because you run the risk of borrowers defaulting on their payments. To keep this to a minimum, provide small loans to multiple borrowers and use only surplus money—not money you need for groceries or bills. If you’re new to this type of lending, take the time to vet your borrowers thoroughly.
11. Home and space rentals
Through home sharing via Airbnb, you can earn an average of $14,000 a year to put toward living expenses, mortgage payments, retirement savings or an upcoming vacation. This might mean getting a roommate or renting short-term to vacationers or to professionals traveling for business.
You can also rent out your unused garage space to people looking to stow their vehicles, motorhomes or boats. Many cities don’t legally allow RVs to be parked on the street, so renting out any extra space you have can be a great passive-income source. You can offer these services through sites like Craigslist or Facebook Marketplace, but if you want to be a little more official about it, try a platform such as Neighbor, where users reportedly make an average of $294 per hour worked.
Neighbor reports that hosts in Los Angeles and San Francisco earn the most money per hour of work. So what you earn depends on how much space you’re renting and the market rates in your city. Higher rates are more likely if, say, you use your unused land to set up a small parking area.
12. Vending machine purchases
This one is pretty specific, but buying vending machines and spending a couple hours a month to restock them and claim your earnings is another simple way to sell products with minimal effort. You can earn a few thousand a month depending on how many vending machines you purchase.
How much work does passive income require—really?
The most common myth around passive income is that it requires no work. But experts warn there is certainly upfront work, as well as a certain amount of maintenance required. “As with anything in life, if it were too easy, everyone would be doing it,” Alev says. “Getting a business started—even if it’s passive income—takes some time and often money, so be prepared to invest in your business at first in order to get it to a good place.”
Schroeder-Gardner agrees. “One common misconception about passive income is that there is no work involved.” That’s not always the case. “Plus, some passive-income streams are more passive than others,” she adds. “For example, typically dividend paying stocks are less work than being a landlord with rental property.”
How is passive income taxed?
Like all types of income, passive income is taxed. The difference is you’ll likely have to report those earnings yourself in order to pay the taxes on them each year.
Be sure to consult a CPA, especially when you’re getting started. You might find that at a certain point you’re earning enough money through passive income to be paying quarterly taxes, for instance, and you’ll want to stay on top of that. Something that might definitely need looking into is whether or not you need to pay the investment income tax, which is usually applicable for investment income that exceeds a certain amount. Another point to note is long-term capital gains and specific dividends usually have lower tax rates.
“Your source of passive income should be by the book and follow any relevant tax laws,” Alev says. “Make sure to save for any estimated taxes so that you’re not surprised when it comes time to make payments.”
Mistakes to avoid when launching a passive-income plan
- Don’t underestimate the workload. “The internet makes it seem like it’s some magical thing where you don’t have to do anything, it just flows,” Moss says. “But the reality here is just a varied amount of either lots of upfront work, or at least a little bit of ongoing maintenance.”
- Follow the rules. While there might be a learning curve to generating passive income, you shouldn’t try to get the hang of the tax side of things as you go. Instead, consult an accountant at the outset.
- Change your mindset. An abundance mindset is key, but Davis also says you must believe the idea that multiple income streams are best. Don’t wait until you’re unhappy with your job or you get fired. Instead, change your mindset now from “I should have another income stream” to “I must have another income stream,” and you’ll be in a much better position in the long run.
About the experts
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Sources:
- Niki Puls, passive-income mentor and CEO of Slow Living Simplified
- FNBO: “FNBO’s Guide to Passive Income: Key Strategies for Financial Health”
- Chamber of Commerce: “Cities Whose Residents Make the Most Passive Income”
- Courtney Alev, senior director, product management & head of tax at Credit Karma
- Steve Davis, CEO and founder of Total Wealth Academy
- U.S. Bureau of Labor Statistics: “Employment Situation Summary”
- Michelle Schroeder-Gardner, CEO and founder of Making Sense of Cents
- Adrian Tamminga, co-founder and business manager at Iron Embers
- Turo: “Investing in Turo hosts’ earnings and profitability”
- Neighbor: “Breaking Records in Passive Income: Neighbor Hosts Average $294 Per Hour of Work”
- Wes Moss, managing partner and chief investment strategist at Capital Investment Advisors
- IRS: “Questions and Answers on the Net Investment Income Tax”
