Finance expert reveals 5 ‘low risk’ passive incomes that could earn Brits thousands
It’s estimated that 54 per cent of adults don’t have a side hustle to generate extra income, citing a lack of time and fears of losing their savings as the main reasons. Yet 8.3 million Brits hold more than £10,000 in savings, and 80% of those savers aren't earning any interest at all.
Michele Tieghi, financial expert and founder of psyfi money, says passive income is the best solution for time-tight savers, and it doesn’t have to mean taking big risks. Here he outlines seven safe and practical ways to build additional income streams securely.
Cash ISAs
Risk Level: No risk
Over 36 per cent of UK adults keep their savings in bank accounts that pay little to no interest. This means that, due to inflation, your savings lose value each year, even though the number isn’t decreasing.
Consider investing in a Cash ISA, which can offer up to a 4.4 per cent interest on up to £20,000 (£12,000 from April 2027), completely tax-free. Putting £20,000 into a Cash ISA with a 4.4 per cent interest rate would earn you an additional £880 a year (£538 from April 2027). It also offers a guaranteed return, making it a risk-free investment, as your capital is protected from market losses.
Premium Bonds
Risk Level: No risk
Potential annual earnings:
Premium Bonds are a government-backed scheme where money invested does not earn interest, but instead enters you into a monthly draw for tax-free prizes ranging from £25 to £50,000.
This offers a safe investment, as your money can’t lose value, and is good for people who might need quick access to cash, as it can be removed at any time with no penalties. However, it’s important to note that with Premium Bonds, there is no guaranteed income. But with a £20,000 investment, it’s likely you’ll earn between £600 and £900 a year.
Diverse Stocks Portfolio
Risk Level: Low risk
The word ‘stocks’ often scares away inexperienced investors, but there are ways to get a good and relatively safe return on investment if you’re looking to save long-term.
A way to do this is to diversify your trading portfolio with index funds and ETFs. These are low-cost investment vehicles that offer diverse exposure to the stock market. This diversification of investment ultimately reduces potential risk: as if one industry suffers, others soften the fall.
Long term, the average return on investment for index funds and ETFs is between 7 and 10 per cent a year. Which, from a £20,000 initial investment, would be between £1,400 and £2,000 annually. But if you’re new to the stock market, start with a lower figure, and increase your investment as your confidence level rises.
Revenue-Based Crowdfunding
Risk Level: Low risk
Revenue-based crowdfunding is when you invest in a business, and then get paid back a percentage of its revenue until you reach your target return.
It comes with less risk as you will receive regular payments from day one, unlike buying shares, where you will only make money if the business gets acquired, goes public or sells equity. There’s no guarantee when this will happen, or that it will happen at all.
The money you can earn from this depends on the deal you have agreed to. For example, you could agree to invest £1,000, and then have a return target of £1,300, which would leave you with a £300 profit. This profit increases with how much you are willing to invest.
Green Bonds
Risk Level: Low risk
Green bonds are loans you give companies, banks or governments to fund environmentally friendly projects, and in return, you earn interest. They are seen as safer investments due to the fact that you often invest with stable institutions (governments and banks, particularly).
For example, if you invest £1,000 in a green bond at a four per cent interest rate, over five years, you will earn £40 annually, which over five years would be £200. However, investing a higher sum like £20,000 would return £600 a year, and £3,000 after five years.
Overview:
It’s estimated that 80 per cent of Brits are still affected by the cost of living crisis, so having a passive income alongside your regular job can be a great way to offset this. It’s equally crucial to ensure your savings are working hard enough to beat inflation, so your money doesn’t quietly lose value over time.
The factor that most stops people from thinking about a side income is the potential risk involved. But the above seven examples show that you can maximise your earnings whilst taking little to no risk. Choose the ones that work best for you. You might start investing your money into something with no risk, and as your confidence grows, you might decide to move up to the ‘low risk’ category.