Most of us would love to build up a stream of passive income. As well as the obvious benefit of having to rely less on our primary income source, a second income gives us financial flexibility to perhaps take an extended holiday, pursue another career or even retire early.
But dreaming of passive income is the easy part. Finding a second income stream and making it happen is where things get trickier.
So today, let's discuss three potential sources of passive income that can hopefully help you to turn the dream into reality.
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3 of the best places to look for passive income today
The bank
For most of the past decade, interest rates have been at historically low levels. That has probably conditioned a generation of aspirational Australians to ignore the bank when it comes to building wealth. But the picture today is one that hasn't been seen for a long time.
With the Reserve Bank of Australia's latest interest rate hike, the cash rate now stands at 4.35%, the highest level since late 2011. As such, you can now find a savings account or a term deposit offering an interest rate as high as 5.3% if you shop around.
That means, for example, you can put $10,000 in the bank and reasonably expect $530 of guaranteed, safe passive income every year.
Rent what you own
Most passive income seekers would be aware of an investment property as a potential source of second income. However, that's easier said than done. Even so, the basic principle remains the same for other assets you might own. Perhaps you own a house with a car park, but no car. Or a spare bedroom. Or even an extra vehicle.
Those are all assets that you might consider renting out. There are a myriad of platforms that allow you to rent out your car, basement or garage. If you live in a capital city, chances are the value of these assets will be in high demand. You never know, your next source of passive income could be right under your nose.
Passive income from ASX shares
Of course, we had to mention ASX shares. This is The Motley Fool after all. ASX shares remain one of the best places to find a second income. Most ASX shares pay out periodic dividends to their investors.
This is passive income in its finest form, seeing as you don't have to lift a finger once you've bought the right company. What's more, most dividend-paying shares also attach franking credits to their shareholder payouts, further boosting the potential returns investors can enjoy.
The best ASX shares tend to raise their dividends over time as well, so in this way, investing in the stock market can be a lucrative place to begin your passive income journey.
As an example, an ANZ Group Holdings Ltd (ASX: ANZ) bank account today offers a maximum interest rate of 4.9%. But if you bought ANZ shares at their last share price of $24 at Friday's close, you would have inherited a trailing dividend yield of 6.46%. That comes with some franking credits as well.
Of course, dividends are not guaranteed, so there's always the risk that the company you buy will cut its dividends down the road. But if you do your research and invest in healthy, growing companies, chances are you can secure passive income that will only grow over time.
