The $1,250 Passive Income Stream 45% of Millennials Miss Out On

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There are lots of passive income streams out there, and we can't all jump on all of them. Some people own real estate, others earn cash from e-books and video courses. Still others own investments such as stocks. Interestingly, 45% of millennials are missing out on stock market investments.

Passive income is any income that doesn't take lots of active work to maintain. For small business owners, passive income can be a good way to stay afloat while you focus on growing your company's bank account balance. Whatever your situation, an extra cash stream can help you make ends meet or boost your retirement fund.

Some millennials could be earning $1,250 in passive income

According to The Motley Fool research, 55% of millennials own stocks. The study shows 42% own dividend stocks. Dividends are a way some companies share some of their profits with shareholders. They can be an excellent source of passive income.

Bear with me for some creative accounting.

Northwestern Mutual's 2024 Planning & Progress Study tells us that millennials have an average of $62,600 invested for retirement. We don't know what proportion of that is in dividend-paying stocks -- some companies pay higher dividends, others pay none at all. But we can still use that figure to guess how much millennials might earn from dividend payments.

The average dividend yield for the S&P 500 -- a good benchmark for stock market performance -- is around 2%. On that basis, a $62,600 investment might generate dividend payments of over $1,250 a year. That does not include any increase in the value of the investments themselves.

If, like many millennials, your dividend-paying stocks are in an IRA or other retirement account, there may be tax consequences if you want to withdraw the dividend payments before you retire. Indeed, many IRAs will automatically reinvest your dividend payments. That's great if it is money you want to use to build your retirement nest egg. If not, it is important to understand how to best access those payments.

Building passive income streams

The difficulty with any passive income stream is that it often takes serious amounts of time and/or money to get started. Ideally, you'll need to throw in a dash of knowledge as well. If it were easy, we'd all be making thousands of dollars in our sleep. That said, it is doable -- and you don't have to be an expert to build an investment portfolio.

Start by opening a brokerage account or retirement account. If you're able to contribute even a small amount each month, it will add up over time -- especially if you re-invest any dividend earnings. If you're not sure what to invest in, look into ETFs. These are baskets of securities that give you exposure to a mix of assets in one go.

Side hustles can generate other -- less cash-intensive -- sources of passive income. However, not all side hustles are passive. A side hustle making deliveries or working as a virtual assistant is a second job. But there are other hustles that don't involve lots of ongoing work.

If you are creative, you might set up a store on a site like Etsy to sell your own t-shirt or poster designs. Print-on-demand services can fulfill the orders for you, so you don't need to build huge inventories or spend hours sending out packages. E-commerce solutions and email marketing software can minimize the time involved in managing your store and customers.

If design isn't for you, think about what skills or knowledge you can monetize. For example, online video courses are another popular passive income source. If you've got experience or skills to share, it could be worth investing the time to build your own course. There are some excellent platforms for all kinds of online learning.

You can earn passive income

Dividend-paying stocks are one of the most passive sources of passive income. You will need to do some initial research to decide what you want to invest in and there will be some ongoing work to manage your portfolio. Apart from that, if you're a buy-and-hold investor, you can be pretty hands-off.

Indeed, the biggest challenge is finding the money to invest in the first place. If you're one of the millions of millennials who hasn't yet been able to invest in the stock market, don't panic. Check over your budget and see if you can find even $100 a month to invest. If that's not an option, look into a side hustle or a less cash-intensive passive income play. It can be liberating to not have to work hard for every dollar you earn.

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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. Emma Newbery 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 .