Day 3 Finance: What is Active/Passive Income?

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Understanding Active and Passive Income: A Kid-Friendly Guide

1. What is Income?

Income is the money you earn. It can come from different places like when you do chores and get an allowance, or when you sell lemonade at a lemonade stand.

2. What is Active Income?

Active income is money you earn by working for it. You have to do something to get this money, like:

  • Doing Chores: When you clean your room or take out the trash, and your parents give you money, that's active income.
  • Part-Time Jobs: When you're older, you might babysit, mow lawns, or work at a store to earn money.

With active income, you need to put in time and effort. If you stop working, you stop earning!

3. What is Passive Income?

Passive income is money you earn without having to work all the time. You do something once, and then it keeps bringing in money, like:

  • Writing a Book: If you write a book and sell it, you can keep earning money every time someone buys it, even while you're sleeping!
  • YouTube Videos: If you make a video and people watch it, you can earn money from ads even after you've finished making the video.

With passive income, you can keep earning money even if you’re not actively working on it.

4. Why is it Important?

Understanding the difference between active and passive income helps you plan how to earn money. Active income is important because it gets you money quickly, but passive income is powerful because it can keep bringing in money over time without much extra effort.

5. Example to Remember:

Imagine planting a tree. Active income is like picking apples from the tree every day (you have to keep working to get the apples). Passive income is like planting the tree and then it keeps growing apples on its own, so you can pick them whenever you want!

Quick Recap:

  • Active Income: Money you earn by working (like chores or jobs).
  • Passive Income: Money that comes in even when you're not working (like from a book or video you made).

Bonus Tip:

Try to think of ways you can create passive income, even as a kid! Maybe you can sell artwork online or start a blog. It’s fun and can help you earn money while you sleep!

Steem to the Moon🚀!

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