- More and more people want passive income now that the pandemic has dampened traditional income opportunities.
- Try to maximize your 401(k) at your current job or see if you are missing any benefits.
- Keeping your money in a savings bond can also give you an unexpected bonus at the end of the year.
- Read more stories from Personal Finance Insider.
With recent stock market volatility, many people are flocking to stocks and crypto to earn passive income. While there are success stories of people earning thousands, if not millions, from stock trading, there are lesser-known stories of people losing their life savings in risky crypto or stock investments.
We asked three experts about the unglamorous sources of passive income that people often overlook when looking for more fashionable investments instead.
1. 401(k) correspondence from your employer
This seems like basic advice, but financial adviser Hannah Whatley, CFP, AIF at the investment firm Rather & Kitrellsuggests that people whose employers provide 401(k) consideration to save for retirement should maximize that consideration before investing their money in other investments.
Read your benefits documents carefully to find out if your 401(k) contribution is eligible to be matched by your employer, how much it will match, and when your employer will actually start matching. For example, some companies don’t match 401(k) contributions until you’ve worked there for a year or more.
2. Savings vouchers
Doctor and entrepreneur Shaan Patel, who earns an extra $250,000 a year in passive income, suggests putting your money in a US Treasury savings bond. A bond is a loan you give to a government in exchange for a steady stream of income over a set period of time. According to US Treasury websitethe bond interest rate until April 2022 is 7.12%.
Patel says he regularly converts his “dead” money, which is just in an account with no interest rate, into “living” money, to grow in an account with a higher interest rate. If you plan to keep a fixed amount of money in a savings account for a year or more, Patel says you’re better off leaving it in a savings bond where it can grow at a faster rate.
3. High Yield Savings Accounts
A regular savings account can have interest rates as low as 0.03%, while a high yield savings account can earn up to 1% (although rates fluctuate). For example, if you keep $10,000 in a regular savings account, it will only grow by $3 after one year at 0.03% interest. In contrast, a high-yield savings account with an interest rate of 1% would earn $100 more by the end of the year.
“It seems small, but if someone says out of nowhere, ‘Hey, here’s $100 in groceries!’ you’d probably take it,” says Patel. “But if someone suggests you open a high-yield savings account, people say it’s too much work. It’s easy money and that’s for sure.”