How to Earn $1,500 Monthly with 8 Passive Income Strategies in Singapore

Earning S$5,000 a month in passive income is a dream for many Singaporeans, but let's start with a more achievable goal—S$1,500. Imagine the freedom an extra S$1,500 a month could bring. Whether it's treating your family to a special dinner, saving for a vacation, or building up your investment portfolio, that extra income can make a significant difference in your life.

Creating a passive income stream tailored to your needs isn’t just about reaching lofty financial goals; it's about setting realistic targets that align with your current lifestyle and future aspirations. Starting with S$1,500 per month may seem modest compared to the dream of S$5,000, but it’s a practical step towards financial freedom.

In this article, we'll explore 8 strategies to help you build a passive income portfolio in Singapore, one that requires minimal effort but delivers consistent returns. Whether your goal is early retirement, funding your passions, or simply enjoying a little more financial flexibility, these strategies can help you get there.

#1 Rent Out Your Extra Bedroom

Renting out an extra bedroom in your HDB flat can be a practical way to generate passive income in Singapore. This approach allows homeowners to monetise unused space, providing a steady monthly cash flow. 

The high demand for affordable housing options among expatriates and students makes renting out a room an attractive option, especially in areas close to business districts or educational institutions.

Homeowners must ensure they comply with HDB regulations, which require that they reside in the flat while renting out the extra room. 

• The rental duration must be a minimum of six months
• Tenants must be Singapore Citizens, Singapore Permanent Residents, or holders of an Employment Pass, S Pass, Work Permit, Student Pass, Dependent Pass, or Long-Term Social Visit Pass. 

Adhering to these rules helps maintain the integrity of the housing market and ensures legal and safe renting practices.

The rental income from an HDB room can significantly supplement one's finances. Depending on the location and amenities, homeowners can charge between SGD 600 to SGD 1,500 per month for a room. This income can help cover monthly mortgage payments, utility bills, or even contribute to savings, making it an appealing strategy for those looking to enhance their financial stability without significant upfront investment.

Additionally, renting out an extra room allows homeowners to benefit from the growing demand for rental properties without the need to purchase an additional property. This strategy minimizes financial risk while still providing a reliable source of income. 

By carefully selecting tenants and maintaining the property, homeowners can enjoy a steady and passive income stream that complements their overall financial goals.

#2 Invest in Dividend Stocks

Dividend investing in Singapore offers a compelling strategy for those seeking passive income, with the average yield from top dividend stocks typically ranging between 3% and 6%. This average yield, while modest compared to some global markets, underscores the stability and resilience of Singapore's leading companies. 

Top companies like DBS Group Holdings, United Overseas Bank (UOB), and Oversea-Chinese Banking Corporation (OCBC) exemplify this trend, offering trailing annual dividend yields in the 5% to 6% range. These high yields reflect their strong financial health and commitment to returning value to shareholders. 

Additionally, firms such as Singapore Telecommunications (Singtel) and CapitaLand Investment Limited also provide competitive yields of more than 3%, further enhancing the attractiveness of Singapore’s dividend stock market. By focusing on these established companies, investors can benefit from both steady income and potential capital appreciation.

To maximize returns, it is crucial to balance high yields with the company’s ability to sustain these payouts over time. This involves evaluating key financial metrics such as dividend yield, payout ratio, and share price performance, as well as assessing the company’s overall financial health and market position. 

Investors should prioritize stocks with a consistent history of dividend payments and strong fundamentals, ensuring that their investments are both profitable and resilient against market fluctuations.

With careful selection and strategic investing, the average dividend yield in Singapore can serve as a reliable source of passive income, contributing to a diversified and resilient investment portfolio.

By understanding the intricacies of dividend investing and staying informed about market trends, investors can build a robust portfolio that offers both income and growth potential. Read our comprehensive guide to find out more.

#3 Invest in Bonds

Bonds are a popular investment option often discussed alongside stocks, but they operate quite differently.

When you buy shares, you're purchasing a small ownership stake in a company. In contrast, buying a bond means you're effectively lending your money to the company or institution, with the promise of being repaid with interest, known as the "coupon rate." This fixed interest payment can make bonds more reassuring than stocks, providing a predictable income stream.

In Singapore, well-known bond options include the Singapore Savings Bonds (SSBs), Temasek Holdings bonds, and Astrea bonds. These bonds are appealing due to the credibility of the issuers, like the Singapore government or Temasek-linked entities, which makes the risk of default very low. However, this safety often comes with lower returns compared to high-dividend stocks. For example, SSBs offer historical returns of around 2% to 3%, making them a low-risk, stable choice for conservative investors.

A popular strategy for bond investors is bond laddering, which involves purchasing bonds with varying maturity dates to create a consistent cash flow. For instance, an investor might buy bonds with maturities of 1 year, 3 years, and 5 years. As each bond matures, the principal is reinvested into a new bond with a longer duration, maintaining the ladder. This approach not only generates passive income but also mitigates reinvestment risk when interest rates are unfavorable.

While bonds are generally safer, they aren't without risks. Corporate bonds, for example, are susceptible to default if the issuing company fails to make interest or principal payments. To mitigate such risks, many investors turn to bond ETFs, which offer a diversified portfolio of bonds, reducing the impact of any single bond's poor performance. However, it's essential to consider the liquidity of bonds, as selling them before maturity can be challenging, especially if there aren't willing buyers.

While bonds offer a safer investment with predictable returns, they require a commitment to holding them until maturity and may yield lower returns compared to other investment options. Nonetheless, they are a valuable addition to a diversified investment portfolio, especially when using strategies like bond laddering or investing in bond ETFs to balance risk and return.

Read more: Complete Guide to Bond Investment in Singapore

#4 Open High Yield Savings Account and Fixed Deposit Accounts

When exploring passive income strategies in Singapore, high-yield savings accounts and fixed deposit accounts stand out as reliable options, each catering to different financial needs.

High-yield savings accounts offer competitive interest rates, sometimes reaching up to 7.68% per annum, but typically require meeting certain conditions like salary crediting or spending with a linked credit card. These accounts are ideal for those who can manage these requirements and seek liquidity alongside higher returns.

On the other hand, fixed deposit accounts provide a more conservative approach with guaranteed returns over a specific period. For example, a 12-month fixed deposit with DBS/POSB offers an interest rate of around 3.20% p.a.. Fixed deposits are suitable for individuals who prefer low-risk investments with predictable outcomes and are willing to lock in their funds for a set duration.

An alternative to these options is StashAway’s Simple Cash, which offers an attractive interest rate of 3% – 3.8% p.a.. This product is designed to provide a balance between liquidity and return, making it an appealing option for those who want to earn more on their cash reserves without the need to meet stringent conditions or lock in their funds for extended periods.

#5 Invest in Robo Advisor 

A robo-advisor is a digital platform that uses algorithms to manage investments and provide financial advice with minimal human intervention. These platforms are designed to create and manage a diversified portfolio based on an individual's financial goals, risk tolerance, and investment horizon, making investing more accessible and efficient.

StashAway is a prominent robo-advisor in Singapore, known for its innovative approach to wealth management. It offers a range of portfolios tailored to different risk profiles, leveraging technology to optimize investment strategies.

One of its standout offerings is the StashAway Income Investing, which is specifically designed for those seeking a reliable and low-risk source of passive income.

Powered by J.P. Morgan Asset Management, the Income Investing portfolio targets a yield of 4.5% p.a.. It is a low-risk fixed-income portfolio aimed at capital preservation and generating consistent returns through a diversified selection of high-quality bonds. This product offers several advantages, including:

• flexible reinvestment and payout options
• low fees
• full transparency with no hidden costs.

What makes StashAway Income Investing particularly attractive is its flexibility. Investors can choose to automatically reinvest their dividends, allowing their investments to compound over time, or opt for regular payouts to supplement their income.

The portfolio is designed to minimize volatility, with a low expected volatility range of 3-7% over the long term, making it suitable for those who are risk-averse or looking to preserve their capital while earning steady income.

Read more: Best Robo-Advisors in Singapore

#6 Invest in Annuity Plan

If you're looking for a reliable income stream during retirement, purchasing an annuity plan could be a valuable addition to your passive income portfolio.

Annuity plans, offered by insurance companies in Singapore, allow you to contribute either a single premium or regular premiums during your working years. Once you reach retirement age, these plans provide monthly payouts for a specified period or for your lifetime, similar to CPF LIFE, the national retirement annuity scheme.

Annuities offer various options to suit individual retirement needs:

1. Immediate Annuity: Begins payouts immediately after a single premium payment, ideal for those nearing retirement.
2. Lifetime Annuity: Ensures lifelong income, providing financial security in retirement.
3. Flexible Premium Annuity: Offers adjustable premium payments and customizable payout options, allowing for greater flexibility.
4. Deferred Annuity: Accumulates funds over time with payouts starting later, ideal for those planning ahead.
5. Single Premium Annuity: Involves a one-time payment for guaranteed future income, offering peace of mind.
6. Fixed Period Annuity: Provides income over a set period, ensuring consistent payouts during retirement.

These plans can serve as an additional layer of financial security on top of CPF LIFE, ensuring a comfortable retirement with regular, reliable income. Whether you're looking for immediate payouts or a long-term income stream, annuities offer a tailored approach to meet your retirement goals.

#7 Invest in REITS

Investing in Real Estate Investment Trusts (REITs) in Singapore provides an accessible way to participate in the real estate market without the hefty capital and management responsibilities of owning physical property. REITs are diversified across various sectors, including:

1. Retail REITs - Shopping malls and retail outlets.
2. Office REITs - Commercial office spaces.
3. Industrial REITs - Warehouses and logistics facilities.
4. Hospitality REITs - Hotels and resorts.
5. Healthcare REITs - Hospitals and healthcare facilities.
6. Diversified REITs - Mix of property types.
7. Data Centre REITs - Facilities for IT infrastructure.

Singapore REITs typically offer attractive distribution yields ranging from 2% to 10% or more, depending on the type and market conditions, making them a potent source of passive income. 

These yields are distributed regularly, often quarterly or semi-annually, providing a steady income stream. Additionally, REITs in Singapore must distribute over 90% of their taxable income to shareholders, ensuring consistent payouts.

REITs are professionally managed, allowing investors to benefit from expert property management and diversification across multiple properties and sectors. This structure reduces the risks associated with direct property ownership, such as high capital requirements and the complexities of managing tenants.

To get started, investors can purchase REITs through a brokerage account on the Singapore Exchange (SGX), making it as easy as buying stocks. Alternatively, REIT ETFs offer a way to gain exposure to multiple REITs through a single investment, further diversifying risk.

Overall, REITs are an effective way to build a passive income stream while participating in the real estate market with lower risk and capital requirements. We have also written a complete guide to REITs investing in Singapore that can help you in your journey to REITs investing.

#8 Run Affiliate Marketing 

Affiliate marketing is a robust strategy for generating passive income in Singapore by promoting products or services online and earning commissions on sales made through your referral links. Success in this field hinges on selecting the right affiliate programs that offer lucrative commissions and align with your audience.

Direct Affiliate Programs: 

• Amazon Associates, offering commissions from 1% to 20% depending on the product category. Despite Amazon's smaller presence in Singapore, it remains a strong contender for affiliates.
• Lazada’s Affiliate Program is particularly compelling for those targeting the local market, with commissions up to 40% per sale.
• For those in the beauty niche, Sephora Singapore’s program offers a 7% commission on new customer sales, making it an attractive option.

Affiliate Networks: 

Joining affiliate networks like Commission Factory and Involve Asia can significantly expand your earning potential by connecting you with a broader range of brands. 

• Commission Factory partners with major brands such as Samsung and Airbnb, offering commission rates from 1% to 20% per sale, depending on the product. 
• Involve Asia connects affiliates with popular regional brands like Reebonz and Love Bonito, with typical commissions ranging from 1% to 10% per sale.

For further diversification, consider other popular programs and networks such as Shopee, Secretlab, Zalora, CHARLES & KEITH, AirAsia, Castlery, SHEIN, JD Sports Singapore, Cuelinks, Indoleads, and eBay. These programs offer various commission structures and cater to different niches, allowing you to tailor your affiliate marketing strategy to your strengths and target audience.

Affiliate marketing can become a substantial source of passive income in Singapore by strategically selecting and promoting the right affiliate programs and networks. With careful planning and execution, you can earn significant commissions, making it a rewarding online business model.

Leveraging Compound Interest to General Passive Income

To effectively leverage compound interest for generating passive income in Singapore, it's essential to understand how it applies to various financial instruments. Compound interest allows your investments to grow exponentially over time as the interest earned is reinvested, leading to a snowball effect. 

This principle is particularly powerful in long-term investments, where the impact of compounding becomes increasingly significant, making it a valuable strategy for creating a steady stream of passive income.

In the context of the passive income methods we've discussed previously — compound interest plays a crucial role in enhancing returns. By reinvesting dividends or interest payments, investors can benefit from compounding, leading to greater wealth accumulation over time. 

Each financial product will have different compounding frequencies and rates, so understanding these details is key to maximizing returns.

Here's a simplified comparison table illustrating how compound interest can help you grow your wealth and passive income overtime. 

Assuming an annual return of 5.0%, an initial investment of $10,000 and a monthly recurring deposits of $500 with reinvestment, this is how much you will get:

This table assumes a consistent reinvestment of returns, which is the essence of compound interest. The longer you keep your investment, the more pronounced the effects of compounding, thus significantly boosting your passive income over time.

Calculate how much your money can grow with our Compound Interest Calculator.

How Much Passive Income Do You Need?

The "FIRE" movement—short for "Financial Independence, Retire Early"—has sparked a wave of interest among those eager to achieve financial freedom well before the traditional retirement age.

As more people become aware of the importance of building passive income streams that can sustain them through retirement, one critical question arises: How much money do you actually need to retire comfortably in Singapore?

While the FIRE movement offers an appealing vision of early retirement, many may underestimate the amount required, especially considering the rising cost of living and the unpredictable nature of future expenses.

It’s clear that investing is a powerful tool that can help you move closer to your retirement goals, but understanding the specific financial targets is crucial.

Let’s break down the essentials to understand what’s required for a secure retirement and how smart investments can speed up your journey to financial independence.

The Basics of Retirement Living Costs

Back in 2019, a study by researchers from the Lee Kuan Yew School of Public Policy calculated the minimum monthly budget needed for an elderly person in Singapore to cover basic living expenses.

They found that a single elderly individual requires around S$1,379 per month, while an elderly couple would need S$2,351 per month.

However, these figures represent the bare minimum for a basic standard of living, which doesn’t account for lifestyle upgrades or indulgences such as travel, dining, and other leisure activities.

Moreover, recent inflation trends have pushed the cost of living even higher, meaning that these figures are likely to be outdated for those planning to retire in the coming years.

If we adjust for inflation—factoring in a 5% rate from 2020 to 2022 and a 3% annual increase thereafter—a single person might need about S$2,000 per month by 2030. To maintain a slightly more comfortable lifestyle, you should consider budgeting around S$2,500 per month.

Calculating Your Retirement Savings

With these monthly figures in mind, it’s time to determine the total amount you’ll need to retire comfortably.

Given Singapore’s current minimum retirement age of 63 and the average life expectancy of 83.5 years, you’re looking at around 20 years of post-retirement life to plan for.

At S$2,500 per month, your total retirement savings target would be approximately S$600,000.

It’s important to note that this amount doesn’t include additional costs that may arise due to medical emergencies, unforeseen expenses, or other unexpected needs.

A recent survey by Manulife highlighted that, on average, pre-retirees in Singapore have saved around S$423,000 for retirement. However, many respondents believe that around S$1.1 million is necessary for a comfortable retirement—indicating a significant gap between current savings and future needs.

Building a Sustainable Passive Income in Singapore

Building passive income is essential for achieving financial freedom, as it allows you to reduce dependence on active income and create a more stable financial future. By starting with realistic goals, such as generating S$1,500 per month, you can gradually enhance your financial security and enjoy greater flexibility in life. 

Diversifying income streams across different assets and strategies ensures long-term sustainability, making it easier to weather economic changes and work towards financial independence.