If you have $20,000 in savings, it's a huge achievement. Too many of us don't have enough cash squirrelled away to be in a position to comfortably invest surplus cash into the markets. Hopefully, that $20,000 is currently sitting in a high-interest savings account and generating passive income with an interest rate of about 4%.
But even if it is, there is an alternative to cash savings that could get you an even greater bang for your buck. That alternative is investing in ASX shares, of course.
We have decades of data that consistently show investing in shares is the most likely way to maximise your return on investment. Indeed, back in August, we looked at how $10,000 invested in ASX shares back in June of 1995 was able to turn into $143,786 by 30 June 2025. In contrast, that $10,000 would have grown into just $33,677 if it had been left in the bank.
So if you want to build wealth as quickly as possible, shares easily trump cash. But today, let's discuss how you can turn $20,000 into a passive income stream worth $10,000 every year by investing in ASX shares.
Image source: Getty Images
How to turn cash into passive income with ASX shares
Passive income from the ASX shares comes in the form of dividends. Most ASX shares pay some kind of dividend. But only the highest quality companies tend to be able to increase their dividends above the rate of inflation year in and year out.
Washington H. Soul Pattinson and Co Ltd (ASX: SOL) is one of those shares. This investing house has the best dividend streak on the ASX, having delivered an annual dividend hike every single year since 1998.
On the surface, its dividend yield doesn't look too impressive today – sitting at about 2.7% at present. If you invested $20,000 into Soul Patts stock at current pricing, you could expect to receive an annual passive income stream worth about $540.
However, Soul Patts has delivered very healthy dividend growth over the past 28 years. Between 1998 and 2025, the company increased its annual dividends by an average rate of 10.5% per annum. Between 2021 and 2025, the average was 13.5% per annum.
So let's, for a moment and for argument's sake, assume that this company will be able to keep that latter growth rate going forward, which is, of course, not guaranteed. If that ends up being the case, our investor's $540 in annual passive income would grow to over $1,000 in six years, then over $2,000 by year 12.
Assuming no additional share purchases or dividend reinvestment, it would take just over 24 years to hit $10,000 in annual passive income. That's obviously a long time to wait. But it can be sped up by buying more shares along the way, and by ticking that dividend reinvestment plan box. And remember, your initial $20,000 investment would have likely increased dramatically. Far more than it would have done sitting in the bank anyway.
