Why are young investors so obsessed with passive income right now?

There are a number of reasons to like dividends.

Smiling woman upside down on a swing with yellow glasses, symbolising passive income.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Passive income is becoming increasingly popular with young investors (and other investors). Dividends are a great way to receive some of the investment returns and in this article, I'll talk about some of my favourite things about passive income.

MIT AgeLab and Transamerica research showed that younger adults are more interested in information about passive income (29.4%) compared to saving for retirement (23.7%).

That's an interesting result and shows things have certainly changed from a couple of years ago.

More options available

There are a variety of different options for people to utilise to generate good passive income these days such as savings accounts, term deposits, bonds, property, ASX shares and so on.

Interest rates have jumped higher and now we're able to get a better level of passive income in most places.

I love that I'm now able to get a solid amount of interest from my savings accounts.

Why is passive income so attractive?

The idea of passive income is that we don't need to do any ongoing work to generate that money.

Once the money is in the savings account, the bank just pays the interest each month.

We don't need to work in the businesses we're invested in for it to make a profit or pay dividends to us.

I can only write so many articles in a week, but the passive income from ASX dividend shares could (in theory) be significantly more than what I earn from my work. Obviously, I need to do the hard work of earning money to invest and then choose the investment. But I don't need to lift a finger for those ongoing dividend payments to hit my bank account each year.  

Not all the income eggs are in one basket

A lot of the Australian adult population works to make a living. A household may be entirely reliant on their job to pay the bills, afford holidays, get a pet and so on.

How awesome would it be for a household's income to be supplemented by passive investment income?

What if passive income could pay for a tenth of a household's expenditure? A quarter? Half? All of it?

If a household didn't have to rely on their job, they could invest some time in education/skills to improve their earning potential. Someone could choose a job they'd prefer to do, even if it didn't pay as much. Financial independence could mean someone didn't have to work at all, if their finances (conservatively) allowed that.

Diversifying our income seems like a smart thing to do so that we're not so reliant on that particular work, especially if the earnings are relatively short-term (such as for sports stars), cyclical or not reliable in some way.

I continue to invest regularly in ASX dividend shares from the S&P/ASX 200 Index (ASX: XJO) which I believe can pay me growing passive investment income for the foreseeable future.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A woman's hand draws a stylised 'Top Ten' on a projected surface.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a timid session for investors this Thursday.

Read more »

Two men sit side by side on a couch with video game controls in their hands and expressive looks on their faces.
ETFs

ASX ETFs: What do Bitcoin and video games have in common?

These funds are both up almost 100% in a year.

Read more »

Three women laughing and enjoying their gambling winnings while sitting at a poker machine.
Broker Notes

Up 39% in a year, what's Macquarie's price target on Aristocrat Leisure shares now?

Macquarie rates the $44 billion ASX 200 gaming technology company as an outperform. But why?

Read more »

A female stockbroker reviews share price performance in her office with the city shown in the background through her windows
Broker Notes

Is Centuria Industrial REIT a buy, hold or sell according to Macquarie?

The business announced its FY25 result on Wednesday.

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Broker Notes

Down 33%: Does Macquarie rate Treasury Wine Estates shares a buy, hold or sell?

Is the broker bullish or bearish, or something in between?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why ASX, Light & Wonder, News Corp, and Silex shares are dropping today

These shares are falling harder than most on Thursday. But why?

Read more »

Lion holding and screaming into a yellow loudspeaker on a blue background, symbolising an announcement from Liontown.
Share Gainers

Why EOS, Eroad, Neuren, and Westgold shares are roaring higher today

These shares are having a strong session on Thursday. But why?

Read more »

Two men and a woman sitting in a subway train side by side, reading newspapers.
Broker Notes

After reviewing its result, how much upside does Macquarie project for News Corp shares?

News Corp released its FY 2025 results yesterday morning.

Read more »