Passive Income Mindset: Interest vs. Real Income

One of the biggest things I have seen online in regards to passive income is that people have this notion that they can visit a site and make a fair bit of money in a day. In our 'instant-gratification' society, where so many things are available on demand, thinking long-term is not something we are trained to do anymore.

I graduated high school in 2002, and I can remember our home economics teacher saying we would be the last class. At the time I didn't care, I was sick of balancing fake checkbooks or sewing a pillow. Now, I am grateful for those lessons, and I can see the younger generations struggling with something as basic as frying an egg or sewing back on a button.

Wrapping your mind around your current financial situation is one thing, but attempting to imagine the variables in passive income is another. With so many options, where do you begin?

Right now you are probably earning zero dollars / hour in passive income. If you have set up a savings account, let's say you make .02% interest on an account with less than $10,000 from a brick and mortar bank. Interest rates for every bank are different, and make sure you read the fine print.

Now, imagine you can come up with just $100 that you will not touch and leave it in the account. Also, let's assume you are using the same bank for your checking account, and that your bank will wave the monthly fee (often $5) on your savings account:

$100 x .02% APY = 2 pennies. Per year.

What if you have $1000 dollars in that same account?

$1000 x .02% APY = 20 cents per year

Savings accounts are not a good way to earn passive incomes for the majority of us. If you have a million dollars that you don't need, the bank will give you a much better rate. Sadly, that isn't an option for pretty much any of us.

What about CDs? The bank I use requires a $500 minimum for a 3-84 month CD. If you sign up for my bank's 84 month CD (Yep, that's 7 years) you will get a .5% apy:

$500 x 0.5% APY x 7 years = $17.76 over the 7 years, according to the CD calculator at www.bankrate.com which is a great tool for understanding interest rates.

The more money you have, the higher your APY will be. For anyone getting started with little income to play with these options are just not going to bring in the kind of return you were probably expecting.

This is one of the main reasons I made www.passivelyearn.com and The Blog!; Every site I came across when I first started looking into finances said the same things, but none of those options were good for people starting out. This is why I recommend online surveys to people starting their forray into passive income.

2 pennies per year on a savings account with $100, or $2.50 / day with minimal time invested (or more with more effort) to answer some surveys with zero dollars invested. Don't like surveys? Leave the video players from 2 sites running in the background on your computer and earn around 25 cents per day or more.

25 cents? Yes, one day (and it's not the whole day either, 500 ads = 25 cents on InstaGC, which goes by faster than you think) is far better than the 2 cents per years on that savings account. This doesn't take into account stacking multiple CDs over many years. Anytime you can slowly add to your pool of interest-payable investments it's a win.

Check back later for more posts on the math and mindset of investments, passive and near-passive incomes, and earning potentials!

Here's your joke, you greedy joke monsters:

What's the difference between a savings account and me wanting to have kids? Me wanting to have kids has a 0% interest rate.

That.... just.... happened....