What is passive income?

Passive income refers to earnings that are generated with minimal active involvement from the recipient. This means that once the initial effort is put forth to set up the source of income, such as through investments, rental properties, or royalties, the income can continue to flow without the need for continuous active work.

This definition aligns with the idea that passive income is designed to be received regularly, often with little to no effort after the initial setup. For instance, someone who earns money from a blog or a book they’ve written would not need to actively work on it all the time to keep generating income, making it a classic example of passive income.

Other options describe aspects that do not align with the fundamental concept of passive income. Passive income is not derived from active work, nor is it limited to traditional employment settings. Additionally, while some forms of passive income may require periodic management—like maintaining a rental property—true passive income is characterized by the ability to generate returns without ongoing involvement or effort.