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How to earn money while you sleep

The Broke Millennials Club
·12-min read
cheerful happy woman get good news hand holding smart phone over yellow background
It's a dream come true. Here's how to do it. Image: Getty

“If you don’t find a way to make money while you sleep, you will work until you die.” - Warren Buffett.

Week one we covered saving, week two we covered spending and for the third week of your bootcamp we’re moving on to investing.

Whether you’re trying to pay off some debt, top up your emergency fund or make a big purchase like a car or a property, any extra monthly income can help you get there quicker.

You could think about adding a side hustle to get in extra cash - but with so few hours in the day, that option isn’t for everyone.

The good news is, there are other ways to generate income. You can start today and it’ll take as little as just 60 minutes of your time: Investing.

That’s right. With the right investments, you could earn yourself a steady passive income in your sleep. And with careful consideration, it’s easier than you think.

Before you start, you need to decide if you want to invest for the short-term (if you need to make cash quickly), medium-term or for a long-term goal.

That means asking yourself how accessible you want your money to be, and what risks you’re willing to take.

If this is sounding a bit daunting - don’t freak out. We’ll break down exactly how to find your answers.

First, ask yourself the following three questions:

  1. Are you wanting to pay off some debt in the next 12 months (short-term)?

  2. Are you planning a dream trip for a few years’ time (medium-term)?

  3. Or are you even looking to make a large purchase in the future, like a car or a property (long-term)?

Then, to determine accessibility and risk, ask yourself these three questions:

  1. Do you need to access your money at the drop of a hat or are you happy to lock it away for a fixed amount of time?

  2. Are you a risk-taker or are you much more conservative with how much risk you’re happy to take? Can your nerves take a plummet or jump in the market or would you prefer something steadier where the highs and lows are much less extreme?

Now you’ve got an idea of the timeline for your investment, how accessible you want your money and what type of appetite for risk you have.

The next move is working out exactly where you want to put your money.

Short-term investments

(Best for creating an emergency fund, that you might need to access within 12 months)

Online savings account

Current potential annual return: 0.05% - 0.35%

Pros: Very liquid, deposits up to $250,000 are insured by the Australian government, little or no fees

Cons: Very low interest rate (lowest they’ve ever been!)

A savings account, which lets you earn interest on the money you deposit, is one of the simplest investment options available.

The more money you can put in a savings account, and the longer you can leave it there, the more interest you can earn and the faster you can reach your savings goals.

Sounds great right?

The catch is that savings accounts generally have a low interest rate so it won’t earn you a huge amount of money fast, but it is better than leaving it in your everyday transaction account.

Instant and easy access is also hugely beneficial if you’re saving for a short-term goal such as to pay off debt or to build up an emergency fund quickly.

Some banks even offer accounts that reward you for saving which will help you reach your savings goal quicker.

Medium-term investments

(Best for money goals within the next three-10 years)

Peer-to-peer lending (P2P)

Current potential annual return: 5.59% - 8.22%

Pros: No monthly service or exit fees, generally high yields over a short timeframe

Cons: No government-backed guarantee

P2P lending is when individuals loan money to others instead of a bank or other financial institution.

Ever since launching in Australia in 2012, P2P lending has become more and more popular, with ASIC reporting a total of $300 million in loans being written in the last financial year.

These are just some of several key providers who you can use for investment in P2P lending in Australia: MoneyPlace, Plenti, Harmoney, Our Money Market, ThinCats Australia and SocietyOne.

So how do you make money with P2P lending?

It operates much the same way as other peer-to-peer businesses such as Uber or Airbnb. P2P lenders also take a cut in the form of a platform fee, and sometimes also an application fee.

For example, SocietyOne noted in their submission to the 2014 Financial Systems Inquiry that its business takes a commission fee of 1.25 per cent per annual from the interest paid by borrowers and that it passes the rest of the interest on the loan to investors.

It’s worth remembering though that given there is no government-backed guarantee on P2P lending so there are extra risks involved and no protection if borrowers default on their debts.

Short-term bond funds

Current potential annual return: 2-3%

Pros: Flexibility, less risk, less volatility

Cons: Lower return than a long-term bond, index or ETF, may have a investment minimum

Given bonds generally have a 10-year term, a shorter-term bond gives you more flexibility to add some medium-term investments to your portfolio.

Short-term bonds fall on the safer end of the debt securities risk spectrum given that a shorter duration (investment length) or maturity date (end date for the investment) generally leads to less credit risk and a lower interest rate risk.

Short-term bonds are also an attractive option for investors because they effectively reduce volatility (otherwise known as variations in value) while adding diversification (in other words spreading the range of products to minimise risk by being invested in one thing).

Long-term investments

(Best for if you want to make a longer term investment over 10 years)


Current potential annual return: Average of 10%-11%

Pros: Long-term growth, good average returns

Cons: Higher risk, has an investment minimum

Equities (another name for shares, stocks, or securities) have generally performed well, even throughout the financial crisis, so are unsurprisingly an attractive option for investors wanting to place their money somewhere for the long-term and get rewarded for it with a high return.

If you have money to invest and can mentally handle the short term volatility, shares can be a good option for long term returns.

To get started in investing in equities you’d need to select a broker. Here’s a list of stockbrokers to choose from.

So what’s a broker? A broker is effectively a professional trader who buys and sells shares on behalf of its clients.

A broker can help by helping you decide your strategy and help make sure you make the best investment decisions with your money.

One of the downsides however is that when buying equities, the minimum investment is $500 worth of shares which might not be achievable for everyone, especially if you're just starting out on your investment journey.


Current potential annual return: 3% -10%

Pros: Low volatility, variety of items, consistent returns, high interest

Cons: Less liquid compared to stocks, larger volume of investment needed

Bonds generally have a long-term maturity over 10 years which makes them another good way to earn a consistent passive income.

There’s a wide variety of bonds to choose from, including government bonds, municipal bonds and corporate bonds. Each has their own maturity date, minimum investment, interest rate and yield.

For example, government bonds pay interest semi-annually at a fixed rate depending on term length, while corporate bonds pay taxable interest and can have a wide range of maturities from 1 to 100 years.

If you’re planning to invest a larger amount of money and are happy with less liquidity but consistent returns, this could be the investment for you.

And if you want to put some cash aside for your children’s future, there are some bonds in which you’re able to invest as little as $1,000, with no fees, instant access and they might even let you keep adding more money when you have some to spare.

In fact, some bonds even allow you to nominate what the funds are for and also restrict how much a child can access each year (so you don’t have to worry about them blowing it all on the wrong thing later down the line).

Term deposits

Current potential annual return: Up to 1.30%

Pros: Low risk, low maintenance, no service or startup fees

Cons: No extra deposits, less flexibility, won’t benefit from rises in the market

Term deposits are a type of savings account where you can bank your money for a fixed term of months or years at a time, without being able to access it.

You can choose the amount of time you want to invest for when you open the account, generally ranging from 12-60 months.

Your savings balance will have a set interest rate which is usually calculated on your daily balance.

It will then be up to you to choose the frequency that interest is paid into your account, be it monthly, quarterly, yearly or only at the end of the fixed term.

This is a great starting point for first time investors given there is low risk and also low maintenance and no service fees, but there is a lot less flexibility and your returns are lower.


Current potential annual return:

Pros: Small investments, low fees, ease of access, low turnover

Cons: Lower performance, narrow focus, sometimes there are some trade risks

ETFs - or exchange traded funds - are a type of investment fund which is traded on stock exchanges.

Essentially, it’s a collection of stocks that tracks an index or a theme, for example, renewable energy or tech, and can contain stocks, bonds, commodities and other assets.

One of the biggest benefits of an ETF is the fact you're able to invest from as little as $50 via CommSec Pocket.

However, the most common way to access ETF investment is through an online brokerage account which means you’ll have to pay brokerage fees and there is a thorough identification and security check in place before you’re able to buy.

If you want to know more information, here’s everything you need to know about buying your first ever ETF.


Current potential annual return: 5% average

Pros: low fees, low minimum balances, access to a financial advisor

Cons: not much flexibility, no human interaction

Robo-advisers aren’t really robots or advisers at all, they’re just website platforms that ask you a handful of money-related questions when you sign up, like how risk-averse you are or how long you want to invest for. They then pick a portfolio for you based on your responses.

They typically have lower entry points than other funds would. For example, to invest with Stockspot, there’s a minimum investment amount of $2,000. Or, for micro-investing app Raiz, you can invest for as little as $5.

They’re designed for basic portfolios - like beginners - and typically offer lower fees than your average human financial adviser.


If what we've discussed above sounds good, this week's challenge includes some additional things you may want to try.

Remember, you should always seek professional advice in relation to your personal financial circumstances before you commit to any financial strategy.

Length of time to complete: 60-90 minutes

Part 1: Research about ETFs in Australia

There is a wealth of knowledge available on the internet which can help you do your research on everything you need to know about ETFs. But the following resources can help to point you in the right direction.

Part 2: Follow these investment accounts and platforms on instagram

These 5 Investing Instagram accounts are the perfect tools to set you on the right investment path, and keep investing top of mind as you scroll your social feeds.

Part 3: Bookmark these five podcasts on investing

Here’s a list of some quality podcasts, tailor-made for Australian investors.

Part 4: Download an investing app

Part 5: Consider making a small investment

As the saying goes, “The best time to plant a tree was 20 years ago. The second best time is now.”

And you can start small with micro investing (see part 4) or putting small amounts into an ETF.

If investing is something that you’re interested in, the following steps will help you:

Step one: Compare and find the best online share trading platform for you.

Step two: Sign up for a trading account. You’ll need to provide personal details and proof of ID.

Step three: Transfer $50 from your bank account into your trading account (or an amount that suits you).

Step four: Log in to your account.

Step five: Search for the ETF you want and place a buy order. Follow the prompts to confirm.

The guidance and suggestions provided in Yahoo Finance's 6 Week Financial Bootcamp are of an informational nature only, and are not intended to constitute financial advice. You should make your own enquiries as to whether the 6 Week Financial Bootcamp is suitable for your own personal circumstances. Yahoo Finance does not guarantee any particular outcome arising out of your participation in the 6 Week Financial Bootcamp.

By Samantha Menzies, contributing editor at Yahoo Finance Australia.

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