3 Ways To Make $1,000 a Month in Passive Income

Today, many Americans find themselves in a serious financial predicament: not having enough money to pay for an emergency with liquid cash. In fact, according to Empower, 37% of Americans can’t afford an unexpected expense over $400, and 21% have no emergency savings whatsoever.

For You: 4 Things You Must Do When Your Savings Reach $50,000

If you’re living paycheck to paycheck and can’t afford an emergency, it doesn’t have to be this way. Building passive income streams today can provide additional income, and could eventually lead you down a path toward financial freedom in the future.

Here are three things you must do to make $1,000 a month in passive income, according to financial influencer Marc Russell:

Set Up a High Yield Savings Account

Setting up a high-yield savings account is a smart way to maintain liquidity and earn a virtually risk-free yield on your cash every month. High-yield savings accounts are usually online-only, and typically provide a higher APY than savings accounts at traditional brick-and-mortar banks (in some cases more than 4% APY).

Earning an interest payment on your money each month can serve as a steady stream of passive income. The more money you’re able to contribute, the greater your interest payments. At the same time, your money will continue to grow exponentially thanks to compound interest.

Automate Your Saving Deposits

Once you have a high-yield savings account set up, consider also setting up automatic deposits or transfers from your checking account. One smart tip is to set up automatic recurring deposits from your checking account to your high-yield savings account that correspond to your payday. This way, the money will go straight into your savings and it’ll be like you never saw it.

Automating your savings not only allows your money to grow, but it also unlocks higher interest payments which means more passive income over time.

Invest in Index Funds and ETFs

Index funds and ETFs are investment vehicles that track currencies, stocks, commodities and bonds: you’re investing in a basket of investments that are all encompassed in a single fund. For example, if you invest in a fund that tracks the S&P 500, you’ll be invested in the largest 500 largest publicly-traded companies in the U.S. all at the same time.

The benefit of investing in index funds and ETFs is that you’ll shield yourself from market swings and major losses since your money will be spread across various companies. While you’re mitigating risk, you’ll also be building passive income over time as the value of your funds grows and pays you back in dividends.