Our 7 best Ideas to generate Passive Income in Canada

To the point Want to increase your passive income? Here are our 7 best ideas to make money work for you and build financial wealth.

This post is also available in: FR

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.

piggy bank

1 - Credit card rewards

Earning potential: Medium to High

Difficulty: Low

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.

Quick Note: Credit cards, while powerful, can be very costly! Make sure to pay your balance in full to reap the rewards of this passive source. You can gain some serious benefits when you tap in and 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

Earning potential: Low

Difficulty: Low

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

Earning potential: Low

Difficulty: Low

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. The bank currently offers 1.65% interest, no monthly fees and free bill payments.

4 - Robo-Advisor

Earning potential: Medium to High

Difficulty: Low

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:

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

Earning potential: Medium to High

Difficulty: High

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

Earning potential: Medium to High

Difficulty: High

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

Earning potential: Medium to High

Difficulty: Medium to high

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!

This post is also available in: FR

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Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

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