Passive Income Explained: YouTube Scam or Legit Money-Maker?

Somewhere between the beauty gurus and controversial lifestyle influencers, there lies a pyramid-shaped corner of YouTube filled with 20-somethings supposedly making a grand a day doing absolutely nothing—and promising that you can too. The secret these get-rich-quick channels are serving up? “Make your own get-rich-quick channel.” Mmm, tastes fishy.

The truth is a lot of these methods for earning passive income actually require a lot of active work. Plus, the chances of them paying out more than a few McDonald’s value menu items are extremely low. 

So is it really possible to earn more than nickels and dimes while you’re catching Zs? And do you have to spam all your friends on social media to do it? Here’s what you need to know about passive income and how it works.

It isn’t possible to earn money without lifting a finger. However, passive income means your earnings aren’t directly tied to your time and labor, even if you do have to do a little work.

Let’s say you just graduated, got yourself a real grown-up job, and moved into your very own apartment. Paying rent is a struggle now that you don’t have 12 roommates, and you still live in a college town, so the nonstop parties down the street have got you showing up to work looking like a character from The Walking Dead. It’s Friday night, the streets are alive with the sound of Lil Jon singing “shots, shots, shots...everybody!,” and a business idea springs into your head: selling jello shots to college students.

If you choose to do it yourself, that’s active income. You have to spend your whole day off whipping them up and selling them to party-goers, but you’ll get to pocket all the profits. In exchange for your Saturday, you make $200.

If you chose to pay someone else, that’s passive income. You get to enjoy your Saturday while your little helper does all the work. You have to pay them $50 though, so you only pocket $150.

That being said, if your jello shots are a hit, you can hire another student and double the batch next weekend. You make $400, pay your workers $100, and pocket $300. Now you’re doing less work and making more money. That’s the beauty of real passive income.

Even if you perfect your jello shot business and delegate every task, you still have to put in work upfront sourcing ingredients, hiring and managing employees, and dealing with any hiccups along the way. However, unlike making an hourly wage, the money you earn doesn’t depend completely on your time and labor.

Most of the passive income strategies promoted by bloggers and YouTubers aren’t all that passive. If you google passive income ideas, you’ll likely stumble upon something that looks like this:

1. Start a blog
2. Become an Instagram influencer
3. Host a podcast
4. Do affiliate marketing
5. Sell digital products (eBooks, online courses, etc)
6. Open an Amazon dropshipping store
7. Build an app
8. Make a YouTube channel

These strategies might get you a stream of cash that keeps trickling in even after you’ve closed your laptop for the day, but they also require a huge upfront investment of time and money. 

In fact, from building websites to creating content to growing a loyal following, most of these projects will probably involve even more work than your typical 9 to 5. On top of that, there’s no guarantee that you’ll ever make money off of them, even though you might be pouring cash into them to get the ball rolling. (We’re sure you’re very charming, but for every viral TikToker there are thousands with a single-digit following.) 

This combination of a huge upfront investment and very low odds of a payout make these not-so-passive income strategies extremely risky.

All the manifestation rituals in the world can’t make money appear out of thin air. You’ve got to put something in to get something out. If it’s not time or labor, it’s money.

Making money off your money is the most passive way to generate income. You invest, watch it grow, cash out, repeat. Plus, you don’t need to put up thousands to get started—it’s now possible to invest with spare change.

If you’d bought $500 worth of stock in Zoom right before the pandemic hit, you’d have almost $3,000 now. Investing apps like Robinhood, Stash, and M1 make it easy to invest in stocks with just a few clicks on your phone, and they also let you get started with just $1. Apps like Acorns automate it for you even more, rounding up every time you make a purchase and investing the spare change for you.

Many a fortune was built on real estate, including a good chunk of Ellen DeGeneres’s, who amassed a $450 million real estate portfolio during her career as a talk show host. You don’t need to have a down payment ready to start investing in real estate either. Group real estate investing apps like Fundrise, GROUNDFLOOR, and Modiv let you get started with as little as $10. They take care of all the buying, renting, and selling, and you can earn monthly passive income for investing your funds.

Investing in the stock market can be an effective way to earn consistent passive income for long-term goals like retirement, but if you enjoy the thrill of a high stakes game, you might want to set some money aside for investing in startups. These high-risk, high-reward investments could tank, or they could 100x your money. Now that there are apps like MicroVentures and Republic that let you invest in startups for as little as $100, you can shoot your shot without all the risk.

The first time Bitcoin jumped in value, it went from being worth $0.0008 to $0.08 in 2010. Now, one bitcoin is worth over $30,000. If you want to hop on the wild ride of cryptocurrency and try to earn some passive income off the next Dogecoin, apps like Kraken, Coinbase, and Gemini make it easy. You can buy, sell, and trade crypto on-the-go, and some of these apps have no minimum investment requirement.

The most valuable and limited resource in the world isn’t gold, or oil, or even data. It’s time. Severing the link between time and money by investing on the side means you can increase your money-making potential and get your time back.