InvestingStrategies

10 Ways To Make Passive Income In Your 20s (UK)

Nothing worse than the daily grind, right?

Even those who love what they do for a living can be bogged down by having to clock in day after day. 

For those dreaming of a better way to make money (or simply want a little more of it on the side), there is passive income. In your 20’s, you may have found yourself with the freedom and time to explore different methods of making money. If this is the case, then you’ve come to the right place. In this article, I will fill you in on 10 of the best ways to earn passive income in the UK. 

What is Passive Income?

Passive income is defined as any financial gain that comes without active user involvement. Essentially, passive income is a way in which people earn money overtime without having to do any extra work. Passive income is not a get-rich-quick scheme. It’s a game of compounding results, where slow-and-steady wins the race.

Passive Income vs. Active Income 

Passive income can be defined as a counterpart to active income. Active income is simply a classification for most jobs in which labour, wages, tips, salaries, etc. are exchanged for a paycheck.

10 Best Ways to Make Passive Income In Your 20s

Most commonly, passive income can be generated with an initial investment of either money or time. Although it is very true a lot of passive income can be made with a large financial investment, most people in their 20’s do not have much extra cash lying around. 

For this reason, we’ve outlined some of the best ways to make passive income in your 20’s for every kind of financial situation. 

1. Real Estate & Rental Income

Real estate and rental income may just be the best way to generate passive income in your 20s. This money-making model is tried and true, and has been around since long before “passive income” was even the hot buzz-word that it is today.

Earning rental income is easy. First, you have to buy a property. Then, you have to find a tenant who will lease the property. And there you have it, each month a reputable tenant will be signing a rent check in your name. 

There are some risks involved with rental income. For one, you may not be able to find a tenant, or at least, not one that will pay a rental rate that is more than your mortgage payment. And two, your tenant may not always be able to pay the rent each month. Evictions are ugly and not fun for either party. 

Obviously, there is a bit of a barrier to entry in real estate investing. Most 20-somethings can’t even imagine purchasing a home in London or any other major UK city because they simply do not have enough money. However, by securing a great financing opportunity, UK residents may be able to purchase their first property before they even though possible. 

2. Affiliate Marketing

Do you love the products and services that you purchase and use? Well guess what, so do a lot of other people! Before buying anything these days, most people conduct a few internet searches to see what others are saying about the products they may use. Here, doors open for the opportunity to make money with affiliate marketing.

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Affiliate marketing is the process of earning a commission when recommending another person’s product or service. Most commonly this is done on websites or blogs, but it is also commonplace across YouTube (you’ll often find affiliate links placed in the descriptions of their videos).

Many companies will pay an affiliate marketer a fixed amount or small percentage of the product price if the item was found or purchased through the affiliate’s website. There can often be great money to be made on recommending digital products and services like courses, as unlike physical goods, it does not cost the company money to reproduce them. We’ve seen some companies offer upwards of 50% commission on certain digital products and services.

To get started with affiliate marketing, most people find a niche they are passionate about and begin creating content around that subject. Then, website owners can reach out to companies individually or join an affiliate marketing network. Once a website is approved, authors can build links to direct readers to product pages. If the reader purchases a product, then the affiliate marketer will earn a commission.

Popular affiliate networks in 2020 include:

  • Commission Junction
  • Amazon Associates
  • Impact
  • Shareasale

Affiliate marketing is great because it does not require a lot of capital to start (aside from website hosting and a domain name). Although it may take some time, writing high quality content that helps readers make purchasing decisions can lead to a steady stream of passive income.

3. Stocks & Dividends

Besides real estate, stocks and dividends may be the most traditional way to generate passive income in your 20’s. A dividend is a distribution of a company’s profit among its shareholders. So basically, if you buy a share of a company in the form of stocks, then you could be earning dividends every time that company turns a profit

Although dividends are generally not going to be enough to live off of full-time, they are certainly valuable in maintaining a steady stream of passive income. The dividend history of publicly traded companies can be easily accessed and analyzed in order to help make educated investing decisions. If it comes time to pull out, then you can sell your stocks for (hopefully) a profit in the future.

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4. Bond Investments

When we say “bond investments,” we are not referring to the British Secret Service agent. Instead of high speed car chases, a bond investment is actually one of the more uninteresting ways to make passive income in your 20s.

Bonds are essentially loans to businesses, organizations and governments who need to raise money. In exchange for your investment, you will receive regular interest payments (often referred to as coupons) over the lifespan of the bond agreement. Once a bond hits its predetermined redemption date, then the institution will repay the initial investment amount.

In the UK, government bonds are known as “gilts,” whereas business bonds are called “corporate bonds.” Bonds may be created for both short term and long term contract periods. Returns are not always guaranteed and there are many low-risk and high-risk opportunities available.

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5. Personal Savings Accounts

There are many people out there who would rather put their money into a hole in the ground than in the hands of another person. Understandably so, as investments in companies, governments, and markets are inherently risky. Instead, one of the most surefire ways to have your money make money is by opening a personal savings account. 

There are many retail and digital banks in the UK that offer personal savings accounts. Although many have account minimum requirements, some personal savings accounts can be started with as little as £1. From there, your personal savings will grow at a slow, but steady pace.

Most commonly, interest rates are a paltry 1% or less, but hey, you’re still generating passive income with virtually no risk at all.

6. Advertising

Ads, they are everywhere and someone is paying for them. Advertising is one of the most trusted ways to get any brand’s name or product out into the eyes of the consumer. In 2020, there are many ways to earn advertising revenue as a passive income stream.

If you have a website (or want to build one), banner ads are a great way to earn a small amount of income. Some website hosting companies offer their own suite of advertisements, whereas other website owners choose independently sourced advertisers for their content. 

Off of the web, advertising is still alive and thriving. Many people with vehicles have their cars and trucks wrapped with a company’s logo in order to earn passive income. Of course, in this sense any  property can be turned into profitable advertisement space. After all, don’t you remember that guy who earned thousands of US dollars by wearing branded t-shirts?

7. Rent Out Your Stuff

Speaking of your personal property, are you aware that other people may want to rent it out? It’s true! With services like Airbnb, you can rent out your home (or just a room), car, or even bicycle in order to make a few extra bucks.

In what some people call the “lending” or “sharing” economy, residents of larger cities are able to occasionally rent their things in order to earn an additional income stream. If you are 20-something that has been fortunate enough to purchase a large car or truck, there are likely many people in your area that would like it in order to move or simply head out of town for the weekend.

P.S. Feel free to check out our article on how Airbnb has affected the UK’s housing market in recent times.

8. Create Digital Products

Although some people do not consider it true “passive income,” the sale of digital products can be a great way to earn money in your 20’s. A digital product can be one of many things. Most commonly they are e-books, a software as a service (SaaS), tutorials/courses, templates, stock media, illustrations, and more.

The reason some people don’t like calling digital products “passive income” is because a significant amount of time (and skill) is required to develop and market your products. Think of it this way, if an author spent 3 years writing a novel and then one year touring the book, you really wouldn’t consider any sales as “passive income.” 

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However, there is something to be said about making money in your sleep.

If you have talents, skills, or time,  you can create digital products that other people will happily buy off you. If your digital product is helpful, or entertaining, then you may have the opportunity to benefit from ongoing sales once the item is listed online.

9. Peer to Peer Lending

We have all had a mate that has asked us for money one too many times. In most cases, they are no longer a mate. So although it may not sound that appealing to skeptics, independently lending money to other people is actually a great way to earn passive income in your 20’s. 

Peer to peer lending, also known simply as P2P, is one of the best ways to finance something without having to go through a bank or financial institution. Instead, people can invest privately with one another for everything from crowdfunding a new product or simply making it through the last year of university. 

With P2P lending, there is more freedom, transparency, and less red tape then most traditional loans. If you have the capital to lend out some money to a person or business, then you can earn passive income on your investment, largely on your own terms. 

10. Venture Capital Investments

Lastly, if you don’t want to lend your extra capital to a peer, why not try a startup company? People in their 20’s bridge the gap of the old and new generation and are therefore generally able to maintain a  good pulse on what companies and industries are slated to grow.

If there is a product or company that is actively seeking financing for their startup costs, then you have the opportunity to get in on the ground floor. Occasionally, this could lead to stock options, or just outright profits. Here, passive investors truly feel like they are part of the team, regardless of what the CEO may say about their involvement. In this sense, investing in a venture capital company that you believe in may be the most fun way to earn passive income in your 20’s. 

Wrapping Up

Overall, passive income is a great way to earn some extra income in your 20’s with a variety of involvement levels available. Naturally, the amount of time, money, and effort that go into creating these incomes streams will likely directly translate to their success. 

Although it is called “passive” income, some work will need to be done in order to get started. Ready to try one of these money-making methods now? Then go ahead, your future self will thank you. 

Tom
About author

Fully qualified CISI Investment adviser for 5 year. Managed UK private client portfolios.
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