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Discover the Wonders of Passive Income

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?kids

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

  • If you bought a bicycle and rented it out to kids who don’t have a bike, or you kept a bike you’ve outgrown and rented it to younger kids, for $10 a day, that would be passive income. You would earn $10 each time a kid rented the bike from you but you could be at the movies while you’re earning that money.
      
    You would still need to make sure the tires are filled with air and the gears stayed oiled, but for the most part, it would cost you very little time and money to earn money from renting out the bike.
      
  • Building and renting out a lemonade stand for little kids to use who want to make money selling lemonade would be another way to may passive income. This example follows the same principles as renting out a bicycle, but this time you would have two ways of making money. You could either charge a flat rate—say $8 a day— to rent the stand, or you could charge a percentage of kids’ sales—so if they made $20 and you charged 15% of their sales total, you would make $3.

Do you have other ideas of how you could be earning passive income?

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