Your teen probably already knows the benefits of working to earn money, but do they know how to generate a passive income that works while they don’t have to? If not, here’s how to help them find ideas for a passive income stream to boost their finances.
What is passive income?
A passive income stream is a source of income that requires little or no effort to maintain. It’s a good way to make money as a teen, especially if your teen can’t find a part-time job. Though it’s easier for adults to have a passive income via stocks and shares or renting out a spare room or a parking space, there are ways for teens to do it, too.
Motivate teens to put in the upfront work to set it up by pointing out that once they have set up a passive income stream, it will continue to generate income for them even when they’re not working.
Passive income ideas for teens
A passive income is an excellent way for teens to supplement their money and achieve their financial goals faster. Here are some ideas for them to try.
-
Compound interest, or compounding, is when you earn interest (money) on both the money you save and the interest you earn on that saving. If your teen saves £100 with an annual interest rate of 5%, By the end of the year, you will have earned £5 in interest, making your total £105. The following year, you would earn £10.50 in interest (5% of the original capital and 5% of the year one interest). The year after, you would earn £11 in interest (5% of the original amount of £100 and 5% of year two interest) and so on.
-
Create an online course. If your teen has expertise in a particular area, such as arts and crafts, languages or coding, they can create and sell online courses and sell it to others. This is a great way to generate passive income, as they will earn money every time someone enrols on the course.
-
Sell digital products. This could include ebooks, printables, online art, music, and art. They can sell your digital products through online marketplaces or social media.
-
Start a blog or YouTube channel. If your teen is passionate about a particular topic, they can start a blog or YouTube channel to share their knowledge and expertise with others. Once they have built an audience, they can monetise the channel through advertising, affiliate marketing, or even selling products and services.
-
Become an affiliate marketer. Affiliate marketing is a way to earn commissions by promoting other people's products and services. When someone clicks on an affiliate link on your teen’s social media page and makes a purchase, they earn a commission.
-
Start a dropshipping business. Dropshipping is an e-commerce business where you don't have to carry any inventory. When a customer orders, simply contact the supplier, who will ship the product directly. This is a great way for teens to start an online business with low overhead costs.
-
Rent out unused assets. If your teen has unused assets, such as a spare bike, sports equipment, or even prom dresses, they can rent them out to generate a passive income.
-
Publish ebooks. If your teen is passionate about writing, they can publish their own ebooks on Amazon Kindle or other online platforms. This is a great way to generate passive income, as they earn royalties every time someone buys the ebook.
-
Sell photos. If your teen has a knack for photography, they can sell photos to stock photo websites or even directly to clients. This is a great way to earn a passive income, as photos can be sold multiple times.
-
Sell your voice: Teenagers can sell their voice to companies that create voiceovers for commercials, video games, and other media.
How to save money to start passive income streams
-
Create a budget. This will help your teen track their income and expenses to see where money is going. And start to make changes to save more money.
-
Cut back on unnecessary expenses. Get them to question whether they really need that daily latte. Or that new pair of trainers?
-
Find ways to make extra money. There are many ways for teens to make extra money, such as chores, babysitting, or dog walking. They can also start a small business, such as a car washing or lawn mowing business.
-
Save money wisely. Once they start earning money, it is important to talk to them about saving it wisely. Choose a savings account that offers a high-interest rate so their money can grow over time.
Related: How to save money as a teen
How to find the best passive income stream
It’s not always easy for teens to determine the best income stream for them. The following can help them find where to start.
-
Consider skills and interests. What is your teen good at? What do they enjoy doing? Choose a passive income stream that aligns with their skills and interests so that they’re more likely to stick with it.
-
Ask them to research ideas and learn about different passive income streams and how they work. They should understand the risks and rewards involved in each option.
-
Make sure they start small. They don't need to invest much money or time to get started with a passive income stream. Start with a small investment and scale up as it becomes more successful.
-
Get your teen to be patient. It takes time to build up a passive income stream. Just keep working at it, and they will eventually reach their goals.
How can GoHenry help?
Teens learn best by doing. So show them how to manage money for themselves with a GoHenry prepaid teen debit card. Available for kids aged 6-18, GoHenry is a safe way for teens to practice their financial literacy skills. There’s a companion app for parents which allows you to pay pocket money, monitor spending, top up when necessary and create saving pots. Money Missions is our in-app financial education tool, allowing your teens to explore various financial topics, from budgeting to saving and more.
Related articles
Ways for teens to make money online
How old do you have to be to sell online
Small business ideas for teens
