How to Make Passive Income: 3 Ways to Earn More Cash

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There are so many get-rich-quick schemes out there that it can be hard to really know how to make passive income -- or what really counts as passive income -- these days. There are a few criteria, but the main one is that passive income is a low initial input followed by a set-it-and-forget-it kind of situation.

This means that passive income includes investments , but doesn't include running an Etsy shop where you have to actually put considerable effort into both producing the goods and then shipping them out when they sell.

But how do you make passive income? It's simple, really. Start with a pile of cash (I'm not asking where you got it, but you should stash your horse and bandana somewhere out of sight), and check out the following vehicles for it.

1. Dividend stocks

Although investing in stocks comes with some risk, they are by far my favorite vehicle for passive income, especially when we're talking about real estate investment trusts (REITs). These are companies that own different kinds of real estate, or are otherwise somehow involved in the real estate industry, that you can buy on the stock market through your brokerage account.

With all dividend stocks, you get a portion of the profit returned to you in the form of dividends, which is a sort of cash payment based on how many shares of stock you own on a particular date. These may pay monthly or quarterly, but generally not less frequently.

Let's take for example one of my favorite stocks of all time, HA Sustainable Infrastructure Capital, Inc. (NYSE: HASI). Even the name just kind of makes you want to swoon, doesn't it? As of this writing, the stock is priced at $32.24 per share, and the forward dividend -- that is, the dividend it should pay for the year, if all things remain the same -- is $1.66 per share. It works out to a 5.23% return on your investment in dividends. For doing nothing.

In addition, as the company grows, the value of the stock will likely grow, and you'll have that to sell off later, giving you kind of a double-dip win here.

If you invested $10,000 today, you'd get 310.17 shares at $32.24 per share, and each would pay you $1.66 in dividends. That would be $514.88 in passive income per year, as well as the potential for appreciation the stock would be building year over year. So when you go to cash it out, not only did you have the passive income from the dividend, you'd also possibly have the stock's increased value as extra cash in hand, if it continues to perform as it has in the past..

2. Certificates of deposit

I feel as if I'm writing about certificates of deposit (CDs) a lot lately, but it's because this is the Era of the Short-Term CD. Usually, CDs with longer terms are where the best interest rates lie, but right now, you can get really great returns with very short commitments, generally from six months to a year. It gives you a great rate with a short commitment. Isn't that really what we all want in life?

CD rates for that kind of term are hovering around 5%, and they compound monthly, so if you put your $10,000 from the above example into one for a year, you'd realize a $511.62 gain at the end of the year. Again, for doing literally nothing.

3. High-yield savings accounts

If, like me, you can't be trusted to leave your money in one place for a year without touching it, there's another option: the high-yield savings account . These work just like any savings account -- money goes in, interest comes out. But the interest rate for a HYSA is also about 5%, give or take, depending on the bank you use.

Instead of compounding monthly like a CD, though, many high-yield savings accounts compound interest daily, so you get just a tiny bit more money at the end of the year. But unlike CDs, there are no penalties for early withdrawals, so if you're not always able to fully commit, you can still reap the rewards of today's high interest rates.

If you put $10,000 into a HYSA at 5%, you'll get $512.67 back out if you can leave it there for a year. The daily compounding means you could earn a little more money than you would in a CD. But because the interest rate on a HYSA is variable, there's always a risk it could drop before the year is up.

Passive income should be passive

If these all seem like really boring, hands-off kinds of passive income streams, that's because they are -- and they should be. Passive income allows you to put your money to work so you don't have to. Once you've researched the investment that best fits your risk tolerance and lifestyle, you shouldn't have to do anything else except get a nice check every so often.

I can't tell you how much I squeal with delight when I get my dividends from my REIT portfolio...but it's enough to wake my dogs up, not gonna lie.

We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. Kristi Waterworth has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Etsy. The Motley Fool has a disclosure policy .