4 Short-Term Passive Income Sources to Grow Your Money Safely

4 Short-Term Passive Income Sources to Grow Your Money Safely
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As someone who has achieved financial freedom and is passionate about personal finance education, I understand the importance of investing wisely and managing risk. In 2023, I made some adjustments to my own investments to align them with my risk tolerance and take advantage of high interest rates. In this article, I will share four short-term passive income sources that can help you grow your money without losing sleep at night.

1. Stash the Savings You Won’t Need Until Next Year in a CD

Certificates of deposit (CDs) are a great option for saving money that you won’t need in the near future. Personally, I have opened several CDs this year to save for the down payment on my next home and for upcoming vacations.

When you invest in a CD, you deposit a certain amount of money for a defined period of time. At the end of the term, you receive your initial investment along with the interest earned. CDs often offer high interest rates, some as high as 5% currently, which can rival returns from investments like dividend stocks with potentially higher risks.

One concern you might have is the safety of your money in case of a bank collapse. However, CDs are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) if the bank is covered by the FDIC. It’s important to note that the insurance covers all accounts under your name at the same bank, not $250,000 for each CD or account you have.

2. Treasury Bills Are Low Risk and Easy to Buy

Treasury bills (T-bills) are another short-term investment option that offer low risk. They allow you to lend money to the U.S. government. At first, I found T-bills a bit confusing, often mistaking them for Treasury bonds or notes. To avoid any confusion, make sure you understand the specific type of security you are purchasing.

When I first visited the government’s website for purchasing securities, called TreasuryDirect, it seemed outdated. To familiarize myself with the process, I watched tutorials and ended up buying T-bills through a brokerage account. Now, I can easily track them alongside my other investments using mobile apps.

One advantage of T-bills is that they are only subject to federal taxes, not state and local taxes. This means you can keep more of your investment return in your own pocket. Additionally, T-bills have shorter maturity dates compared to other government debt vehicles, allowing you to see the results of your investment in just a few months.

3. Government Money Market Funds for Diversification and Accessibility

In 2023, I recommend paying attention to government money market funds. Despite the ongoing news about the debt ceiling, I feel comfortable investing in these funds because they are less susceptible to stock market fluctuations. They typically invest a significant portion, 99.5% or more, of their total assets in cash, government securities, and/or repurchase agreements backed by government securities.

Compared to CDs, money market funds offer easier access to your funds. You can quickly withdraw cash or purchase other investments. These funds also provide diversification by investing in securities with interest payments that may not be subject to federal and sometimes state taxes, saving you money in taxes.

Consider keeping your cash in a government money market fund until you find suitable long-term investments. It offers flexibility while providing stability and potential tax advantages.

4. Keep Emergency Funds in a High-Yield Savings Account

While it may sound mundane, a high-yield savings account can be incredibly helpful, especially if you’re living paycheck to paycheck and want to start building a financial cushion. Many traditional savings accounts offered by banks pay less than 1% in interest. By switching to a high-yield savings account, you can take advantage of the relatively high interest rates expected in 2023. This simple step allows you to grow your savings and passive income with minimal risk.

A high-yield savings account provides a no-stress way to earn more on your money while keeping it easily accessible. If you already have a checking account, chances are you also have a savings account that came with it. However, the interest rate on these accounts is often disappointingly low. By moving your funds to a high-yield savings account, you can maximize the growth potential of your savings.

With the current economic climate and interest rates projected to remain favorable, utilizing a high-yield savings account is a smart choice. It provides a safe and convenient option to gradually increase your savings and generate passive income.

Increase Your Risk Tolerance with Self-Reflection

While the four short-term passive income sources mentioned above offer great opportunities to grow your money, it’s essential to assess your risk tolerance and investment goals. Investing always involves a certain level of risk, even if it’s relatively low.

It’s crucial to be honest with yourself about your personal financial goals and avoid comparing them to what others may be doing. Each individual’s circumstances are unique, and what works for someone else may not be suitable for you. Taking responsibility for both your successful and unsuccessful investment decisions is a key part of personal financial growth.

Before implementing any investment strategies, it’s important to evaluate whether they align with your financial objectives, needs, and risk tolerance. Seek out diverse opinions and experiences from individuals who have a proven track record in the field. There’s no need to rush into investments; instead, take small steps that feel challenging yet manageable to gradually build your investment confidence.


Growing your money and generating passive income doesn’t have to be daunting or risky. By considering short-term investment options like certificates of deposit (CDs), Treasury bills (T-bills), government money market funds, and high-yield savings accounts, you can make smart financial decisions that align with your risk tolerance.

These options offer stability, relatively high returns, and accessibility, allowing you to sleep soundly at night while your money grows. Remember to take the time for self-reflection, understand your goals, and seek advice from reputable sources before making any investment decisions.

With a well-thought-out investment strategy and a willingness to learn, you can take control of your financial future and achieve your goals. Start small, be consistent, and watch your money work for you.

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