Passive income = $$ that goes into your bank without you actively doing anything
I'm sure there are many types of passive income and many ways to achieve them. But personally my favourite stream to get passive income from is through investment-linked products (more commonly known as ILPs) that gives you consistent dividend payouts on a monthly basis (i.e. $ paid out to your bank account every month).
❗️DON'T SWIPE AWAY – hear me out.
The term “ILP” may deter many people due to its bad connotations. The common ones being the high fees and charges, and the lock in period. I don't deny that there are fees and charges, but thats because ILPs are essentially still a protection product as well – mainly for death coverage. But the fees aren't as high as you'd think(differs across companies), and most (if not all) ILPs come with bonuses (welcome bonus, loyalty bonus etc.) that kind of helps to “offset” these fees and charges.
Just to clarify – the ILPs i'm talking about here are ILPs that invest 100% of your capital from day 1.
ILPs usually have a lock in period which can vary from 5-25 years. I agree that it does feel very sian that you can't touch your money for so long.
“What if halfway through, i suddenly need to use the money that i've put in?”
“What if i can't afford to continue paying for it?”
Thats why its so important to budget correctly and invest within your means. Having a sufficient amount of money in your emergency fund also ensures that you'll be fine in times of need without needing to prematurely surrender/withdraw your ILPs. Prematurely surrendering/withdrawing can result in high penalties, making the value of your ILP drop significantly. In a way ILPs kind of forced me to save money early which will benefit me in the long run.
I bought my first ILP at 20 years old (in poly year 3). It was $200/month for 10 years. At that point, i had no allowances from my parents but i had a part time job that got me around $600-800 monthly. I knew i could sustain paying $200/month for the ILP because i also had a lot of savings that could probably last me about 3-4 years back then.
Last year, i graduated uni and decided it was time to get another ILP since i'll be working full-time. This time, its $300/month for 15 years. But this particular product gives me dividends of ~$23 monthly on the first year and ~$46 monthly on the second year and so on. Basically the monthly dividend i get increases each year i invest. At year 15, i would be getting a ~$350 monthly dividend. These dividend payouts do not touch my capital at all. So essentially, i get monthly payouts + capital growth. There is also no need to continuously keep track and manage the account which is *chefs kiss*.
This is the kind of passive income i enjoy. Truly not having to do anything and getting money in your bank every month. Makes sense? Lmk what you think too!
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*Disclaimer: These are all my personal experience! Figures are estimated and based on historical results.
