Our 7 best Ideas to generate Passive Income in Canada

Ah, passive income. Yet another tool that smart people (like you) use to build their wealth. Passive income is income generated without any active involvement from your end. In other words, you are not trading your time for money the same way you would with your active income or 9-to-5 job. Passive income is quite amazing when you think about it; it has taken people from average living to financial freedom, setting a life on their terms.

If that is the case, getting multiple passive income streams should be a piece of cake, right? We’ll tell you a little secret: passive income is rarely “passive.” You must often put in a lot of upfront work before you reap the financial rewards. This explains why many people don’t have multiple streams of passive income.

Not to worry! In this article, we will give you 7 great ideas for passive income with varying degrees of difficulty to obtain.

Why Do I Need Passive Income?

In today’s world, we have found a way to vilify the 9 to 5. Guru’s left and right will tell you that you need to become an entrepreneur to be successful. For some, that may work, but the 9-to-5 is still a great tool, especially when you learn where to invest your money. The catch is that the 9-to-5 alone will not get you over the financial freedom hump. In the case of active income streams, you are investing your time which is a)finite and b)unstable. Passive income streams are essential for you to begin seeing your money work for you instead of the other way around.

Not convinced? Another reason you need passive income is that Canadian financial insecurity is steadily rising. According to a survey conducted by MNP, nearly half of the respondents reported being $200 or less away from being unable to meet their financial obligations. With the pandemic, rising interest rates and more, not having passive income streams has become a financial security risk.

You need to diversify now more than ever to get ahead. Here are some ways to do it.

Our 7 best Ideas to generate Passive Income in Canada - piggy bank -3-

1 – Credit card rewards

We’ll start with some low-risk strategies, and you can decide what you think from there. The truth is, passive income has been right under your nose! With credit card rewards, you are going after the points which provide great incentives like free travel opportunities, groceries and much more. It is one of the best ways to make passive income if you are just starting.

The beauty is that you don’t have to do much to earn these points. Continue your daily spending habits, and you will receive these points passively. Some credit cards can give you points just for applying in the form of welcome bonuses as low as 1,500 and as high as 130,000 points, depending on the card.

So, how do you get started?

1 – Find a reward program

Companies create reward programs to build loyalty. The more you interact with their company (i.e. through purchases), the more rewards you get. In this case, you have four reward options:

Airline Rewards program
Hotel loyalty programs
Bank rewards programs
Cashback rewards program

2 – Apply for a Credit Card and Rack up Your Points

We could go into detail on the unlimited amount of credit cards out there for you in this journey, but the most important thing to note is that you accumulate points through everyday use. When applying for a credit card, you can be strategic and apply for the one that will maximize your points.

All of this is basic information, but we are experts in this field. Check our credit card reward guide for beginners to learn more about credit card reward programs.

2 – Cash-Back Apps

Cash-back apps are the ultimate package. They are designed to help you foster great savings habits while giving you money and discounts back on items you usually buy. When used effectively, this is an easy strategy that you can implement to get some passive income on the side. Want to get some groceries? Use a cashback app and gain 10% back on your purchase. The best apps are automated and FREE to use. Cash back apps are an easy passive income stream because you are being paid to shop essentially. Who doesn’t love free money just for shopping?

We have compiled a list of our favourite cash-back apps:

1 – Rakuten

Rakuten, the online shopping portal, is a great platform to get cash back. Their model is quite simple: they are paid commission on purchases and share those commissions with you as cashback. In this case, it is too good not to be true. The best part about it is that it is totally free to register. All you need to do is signup as a member, shop like you usually would with Rakuten retail partners, and receive your payment.

Payment is received via Paypal, Amazon gift card certificates or a cheque mailed directly to you. Registering.

2 – KOHO

KOHO is another excellent platform that instantly gives users 0.5% cash back on whatever they spend. Using their credit card products like the KOHO Mastercard Prepaid card may be eligible for extra cashback on top of the 0.5% guaranteed. All of this is offered while helping you save and budget!

3 – High-Interest Savings Account

If you have some extra cash or have a short-term financial goal you want to achieve, putting your money into a high-interest savings account (HISA) might be your best bet. HISA’s differ from traditional savings accounts as they offer a higher interest rate for your money. We hate to break it to you, but this isn’t going to make you the big bucks. It is, however, a great financial tool to earn passive income for emergency funds and conservative investments for retirement.

Not all HISA’s are created equally. Interest rates vary from institution to institution. If you are looking for an online-only banking option, without a doubt, EQ Bank carries an excellent track record and is a great place to store your cash. For more information on HISA’s, make sure to read our guide to find the best accounts.

4 – Robo-Advisor

This one is for those who want to get into investing but wouldn’t want to be involved in managing a portfolio. Using a robo-advisor for passive investors comes to mind. And guess what? History tells us that markets go up, so it will reward the patient investor. Robo-advisors provide automated investment services without the need for your constant supervision. Sure, you could manage your investment portfolio, but things like the stocks you buy, when to buy and sell, decision making and rebalancing are all done by the robo-advisor.

The appeal of robo-advisors is that they are worth a fraction of the price a real-life advisor is and provide mainly beginner investors with emotional relief from the craziness of the investing world. Some of the best robo-advisors in Canada include:

Wealthsimple
Questrade
CI Direct Investing

Just to name a few. We detail a bunch more in our article on robo-advisors. Feel free to check it out.

5 – Dividend Stocks

If you have an interest that you don’t mind writing about, blogs may be a great outlet and stream of income for you. The internet is so vast that there likely is a target market that you can build a community around. Take us, for example – we have developed a blog around helping Canadians understand the ins and outs of loyalty programs and credit cards. Blogs are admittedly tough to start, and the passive income doesn’t come from the consistent blogs you post. Once you have established a solid number of visitors to your page, you can monetize your blog by doing the following:

Advertisements
Affiliate marketing

You can also leverage your digital products and promote them on your site to maximize your sales funnel. To get a blog going, you need a blog host ( i.e. Bluehost) and a blogging platform (i.e. WordPress). From there, you pick a domain name and start strategically writing to target your audience as effectively as possible. Why not you?

6 – Digital Products

Digital products are an excellent method to generate passive income. Digital products exist solely in digital form and vary widely depending on your target market, niche and product.

You can sell anything from resume templates, checklists, online courses, graphic designs, and more. While the initial conception of the product will take effort, once you have uploaded the product on a reliable hosting site, the product will never run out – you have no physical inventory to keep.

There is a great appeal in not having to put any additional effort while making sales on your digital products. It is also extremely inexpensive to do, only requiring the skill to develop a winning product.

7 – Dividend Stocks

Dividends are the gift that keeps on giving. When you invest in specific companies, they provide payments to their shareholders as a way of sharing in profits. These are known as dividends. Not all stocks give out dividends; however, with wise decision-making, you could earn money passively from the dividends you receive.

This would certainly be best suited for the experienced investor as you need to be able to pick and hold onto stocks with the proper research. It may also be preferable to have a lot of money upfront. Dividend payments are paid based on the number of shares you own. The more you have, the greater your payment will be. Nonetheless, once you have a solid system, the periodic payments generated from no activity on your end make it a solid passive income stream.

Final Thoughts

This list is only the tip of the iceberg regarding ideas for passive income. The most important thing is seeing the possibilities and understanding they are within reach. We hope you take this list and make some passive income streams work for you!

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American Express Cobalt^® Card

American Express Amex Membership Rewards

Annual fee: $191.88
Our valuationMilesopedia first-year estimate First-year valueWelcome bonus$255Total$255Rewards on your spending are not included. The calculator that adds them from your own profile is on the card's page.: $255
Welcome offerGet 1,250 points after $750 in purchases per month for 12 months: Up to 15,000 points

Apply Now

on American Express's website

Apply with confidence — no impact on your credit scoreApply with confidenceCheck whether your application will be approved before you submit it, with no impact on your credit score*When you apply for a personal American Express Credit Card, we will tell you whether you are eligible without affecting your credit score. So you can apply with confidence.*Instant decisions are only available for consumer Card applications (also called “personal Cards”).

The American Express Cobalt^® Card is the best credit card from American Express, whether you want points for travel or cash back.

American Express Cobalt^® Card welcome offer

The welcome bonus is paid out monthly over your first 12 months. You earn 1,250 Membership Rewards points for each monthly billing period in which you charge $750 in net purchases to your card, in any category (1X, 2X, 3X or 5X). That adds up to 15,000 Membership Rewards points over the year, a welcome offer we value at $255.

Earning the full bonus means $9,000 in net purchases spread across 12 monthly billing periods. This offer rewards steady monthly spending rather than one large purchase.

You can use these points as statement credits on everyday or travel purchases, at the same rate either way: 1,000 points = $10.

You can also transfer them to Aeroplan, Avios (British Airways and Qatar Airways), Flying Blue, Marriott Bonvoy or Hilton Honors. With the full welcome bonus, that is a choice between:

15,000 Aeroplan points
15,000 Avios points
15,000 Flying Blue Miles
18,000 Marriott Bonvoy points

If hotel points are what you are after, our ultimate guide to Marriott Bonvoy and our complete map of Marriott Bonvoy hotels by category show what those points can actually buy.

American Express Cobalt^® Card benefits

Here is what the card gives you, starting with the benefits cardholders use most.

5X points on eligible eats and drinks in Canada: groceries, restaurants and bars, home food delivery and convenience stores. A spend cap applies.
3X points on eligible streaming subscriptions in Canada.
2X points on eligible gas, public transit and ride sharing purchases in Canada.
1 additional point on eligible hotel and car rental bookings made through American Express Travel Online.
1X point per dollar on everything else, with no category restrictions.
Points that hold the same value either way: 1,000 points = $10 as a statement credit, or a 1:1 transfer to several airline and hotel loyalty programs.
No minimum income requirement, as with every American Express Canada card.
Additional cards at no extra cost: the first and every other supplementary card is $0.
The Hotel Collection: a room upgrade when available, 12pm check-in and late check-out when available, and up to $100 USD in hotel credit on amenities charged to the room for a stay of two or more consecutive nights, booked through American Express Travel.
Front Of The Line^® presale and reserved tickets for concerts and theatre performances, plus offers and events curated for cardmembers through Amex Experiences.
A soft credit check before you apply: you can see whether you will be approved with no impact to your credit score. This applies to American Express personal card applications.

To see how it compares with the rest of the line-up, read our round-up of the best credit cards from American Express in Canada.

The 5X categories and where they apply

The 5X rate is the reason most people carry this card. In Canada it covers four kinds of merchants:

Groceries: Metro, IGA, Sobeys, Super C, Safeway, Whole Foods.
Restaurants and bars: sit-down meals, takeout and drinks.
Home food delivery.
Convenience stores: Couche-Tard, 7-Eleven.

The 2X rate covers gas stations such as Esso, Shell and Petro-Canada, along with public transit and ride sharing.

With the American Express Cobalt^® Card, you earn between 1 and 5 points per dollar:

Category	Points per dollar
Grocery (Metro, IGA, Sobeys, Super C, etc.)	5
Home food delivery	5
Restaurants and bars	5
Convenience stores	5
Streaming services	3
Service station	2
Transport	2
Travel	1
Other	1

That works out to a 1 to 5% return on those purchases. For example, if you spend $1,000 per month across groceries, restaurants and food delivery, you earn $50 back per month, or $600 per year from that category alone. Transfer the points to a program such as Aeroplan instead and the return can be higher.

You can also stack these categories with the hundreds of stores that offer 5x points.

American Express Cobalt^® Card insurance coverage

The card comes with a broad insurance package. The amounts below are the coverage limits; conditions, age limits and exclusions are set out in the certificate of insurance linked in the Insurance section above.

Travel insurance

Emergency medical: up to $5,000,000 for the first 15 days of a trip.
Travel accident: accidental death and dismemberment of up to $250,000 for you, your spouse and dependent children under age 23 when travelling on a common carrier (plane, train, bus or ship) and the tickets are charged to your card. Supplementary cardholders and their families are covered too.
Flight delay: up to $500 for necessary hotel, meal and sundry expenses bought within 48 hours when you are delayed or denied boarding for four hours or more and no other transportation is available. This $500 is an aggregate limit per occurrence, shared with missed connection and delayed baggage coverage.
Delayed baggage: up to $500 for essential clothing and sundries bought within four days when your outbound luggage is delayed six hours or more. This $500 is an aggregate limit per occurrence, shared with missed connection and flight delay coverage.
Lost or stolen baggage: up to $500 per occurrence for all insured persons combined, for checked or carry-on baggage and personal effects in transit, when the airline tickets are charged to your card. Within that limit, jewellery is capped at $300 per occurrence and golf clubs, including golf bags, at $250 per occurrence.
Hotel and motel burglary: up to $500 against the loss of most personal items if your hotel or motel is burglarized, when the stay is charged to your card.

Rental car insurance

Theft and damage coverage is included for a rental car with an MSRP, for its model year, of up to $85,000 excluding all taxes, for rentals of up to 48 days. To use it, decline the Loss Damage Waiver (LDW) or any similar option from the rental company and charge the full rental to your card. There is no cost for this coverage, and it replaces the daily insurance the rental company charges, usually $16 to $23 per day.

Mobile device insurance

Your device is covered for up to $1,000 per occurrence when it is charged to the card, for up to two years from the date of purchase. The payout is based on the depreciated value of the device, which falls by 2% of the purchase price for every completed month, less a 10% deductible. Theft and accidental damage coverage starts on the 91st day after purchase, because the first 90 days are covered by purchase protection.

Purchase protection and extended warranty

Eligible items charged to your card are insured against accidental physical damage or theft for 90 days from the purchase date, up to $1,000 per occurrence for all items combined. The card also extends the original manufacturer’s warranty by up to one additional year on eligible items, with indemnification limited to $10,000 per insured item and $25,000 per Cardmember per policy year for all items combined.

American Express Cobalt^® Card fees

Card fee: $15.99 per month, which equals $191.88 per year, for residents outside Quebec. Quebec residents are billed $191.88 per year.
Additional cards: $0.
Purchase interest rate: 21.99%.
Cash advance interest rate: 21.99%.
Foreign transaction fee: 2.5%.
Minimum income required: none.

Because the fee is billed monthly rather than in one annual charge, you can stop and restart the cost in step with how much you are actually using the card.

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Annual fee

Primary card$191.88

Additional card$0

Annual income required

Individual$0

Household$0

Conversion fees

2.5%

Earning rate

5xRestaurants
5xGroceries
5xConvenience
3xStreaming
2xTransit
2xGas & EV
1xAll spending

Value

1st Year Value$1,828

2nd Year Value$799

Transfer partners

AeroplanAirline
British Airways ClubAirline
Cathay Asia MilesAirline
Etihad GuestAirline
Flying BlueAirline
Hilton HonorsHotel
Marriott BonvoyHotel

Travel insurance

Travel medical (under 55)Up to $5,000,000 / 15 days

Travel medical (55-64)Up to $5,000,000 / 15 days

Delayed BaggageUp to $500

Lost BaggageUp to $500

Flight DelayUp to $500

Hotel BurglaryUp to $500

Travel AccidentUp to $250,000

Purchase protection

Purchase ProtectionUp to $1,000 / 90 days

Extended Warranty+1 years

Mobile DeviceUp to $1,000 / 2 years

Auto Rental Collision (primary)Up to $85,000 / 48 days

Not to worry! In this article, we will give you 7 great ideas for passive income with varying degrees of difficulty to obtain.