Which of the following best describes passive income?

Passive income refers to earnings that are generated from investments or assets in which an individual does not have to be actively involved on a regular basis. This often includes revenue streams from rental properties, dividends from stocks, and earnings from business ventures that operate independently of the owner’s direct input.

When you are earning passive income, your assets are working for you, allowing you to receive financial returns without the necessity of continuous effort or active engagement. This concept distinguishes passive income from active income sources, which require consistent labor, such as a traditional job, providing services, or any scenario where time and effort are directly correlated with earnings.

While earnings from interests on savings accounts do contribute to income, this is often seen as a more traditional form of income rather than the broader classification of passive income, which typically emphasizes investments that produce returns over time without ongoing active participation.