Full name: Le Nguyen Minh Anh

Link: https://www.forbes.com/sites/capitalone/2018/10/23/great-destination-
towns-for-viewing-fall-foliage/#523e20894d75

How Your Teenager's Summer Job

Could Make Them A Millionaire

Making a million in retirement off a summer job seems to be too good to be

true. It isn’t. This example illustrates two important savings principles. Firstly,
to start saving early. Secondly, to save tax-efficiently. Combine both with a
robust rate of return and the results may well surprise you.

The Magic Of Compounding

Compounding is a powerful force and the numbers can be surprising. It is

something Albert Einstein allegedly called the “eighth wonder of the world.”
Compounding is earning extra returns on your returns. If you save a dollar,
the next year you may have a dollar and five cents. That five cents earns a
return too, and so on. In a single year it doesn’t make much difference.
However, over decades that compounding really adds up. It means that your
savings can grow, not just in a straight line, but in a line that curves up and
keeps getting steeper. For example, if at age 20, you save a dollar and earn a
7% return on that money, then by age 70 that amount will be worth twenty
nine dollars. Turning a single dollar into twenty nine dollars is not bad. Of
course, we do have to be careful with these numbers, first off, steady growth is
required, which can be hard to achieve, and secondly a dollar today probably
is worth a bit less in future decades due to the impact of inflation as costs go
up. Still a long-term return of 7% after inflation isn’t impossible, with a more
aggressive asset allocation if history is any guide. Though right now, achieving
that return in the U.S. stock market for the next decade or so may be a
challenge.

How Roth IRAs Can Help

Compounding is one part to reaching a million, tax-efficiency is the other. This

is where the Roth IRA comes in. The government wants you to be a saver.
That’s one reason Roth IRAs were created. Here we are not breaking the tax
rules, but using vehicles created to help people save. A Roth IRA doesn’t make
sense for everyone and not everyone is eligible for it. Yet, if you’re in a low tax-
bracket, and expect to be in a higher one in future, as virtually all teenagers
are, then a Roth IRA can be a good idea. A Roth enables you to put away
money after paying the current tax-rate on the income and, essentially, if the
rules are followed and don’t change, then you may never pay tax on it again.
Your income must be under approximately $120,000 depending on your tax
filing status, but for virtually all teenagers doing part-time jobs, this shouldn’t
be an issue. Plus, the maximum you can put into a Roth in any tax-year is
currently $5,500. Finally, there a limited set of uses for the money such as
retirement, college costs or emergency scenarios or even a first home if
conditions are met. If you use the money for something else, or don’t follow
the rules in some other way, there may be a penalty to pay and some of the
returns on the money may need to be paid back too.

The Challenges

Of course, this technique is not without its challenges. The first is simply that
as a teenager the temptation to spend money and not save is strong. Even
if you’re at home with food provided, there are still things to spend money on
whether technology, entertainment or travel, and focussing on saving that you
may not see the benefit of for around five decades is a tough call for many
teenagers. Also, finding a robust way to invest, perhaps through inexpensive
ETFs requires some homework. However, saving is a great habit to start.

Then aside from saving enough, simply earning enough with a teenage job can
be a challenge too. To reach a million at age 70, you need to save around
$5,000 each year between the ages of 14 and 20, so just under the Roth
contribution limit. If you earn $15/hour that’s 6 hours each week, or almost a
full-time schedule over the summer months. Furthermore, college isn’t even
considered here, the reason a lot of kids aren’t jump starting their retirement
is because they money they put aside will more than likely help them with
college first, or perhaps a down-payment on a home. Retirement is a long way
off when you’re a teenager.

 Vocabulary
Words Part of Pronunciation Definination and example
words
Compounding Noun /ˈkɒmpaʊndɪŋ/ Compounding is earning extra
 returns on your returns. ( Lãi kép)

Ex: Compounding arises when

interest is added to initial capital

Stock Noun /stɒk/ Stock is the value of the shares in a

company that have been sold (chứng
khoáng)

EX : People invest in stocks and

bonds.
Allocation Noun /ˌæləˈkeɪʃn/ It means the act of giving something to
somebody for a particular purpose.

EX: The allocation of food to

those who need it most, which
is needed for poor countries

Tax- Noun /taks ɪˈfɪʃ(ə)nsi/ Tax-efficiency is a fixed value tax

efficiency ( thuế khoán)
EX: Tax-efficiency are more
economically than other taxes.

Aggressive Adjective /əˈɡresɪv/ It means acting with force and

determination in order to succeed(
tích cực)

EX: A good salesperson has to be

aggressive in today's competitive
market.
Eligible Adjective /ˈelɪdʒəbl/ It is able to have or do something
because they have the right
qualifications, are the right age, etc. (
đủ điều kiện)

EX: You are not considered eligible

for legal aid.
Tax-bracket Noun /ˈtæks It is a range of different incomes on
 brækɪt/ which the same rate of tax must be
paid. (khung thuế)

EX: There are now only two tax

brackets—22% and 40%.
Tax-rate Noun /tæk reɪt/ Tax-rate is the tax payable per unit
of taxable volume.(thuế suất)

EX: tax for import car is 0%

Assentially Adverb /ɪˈsenʃəli/ Assentially means you think about the

true, important or basic nature of
somebody/something. (bản chất)

EX: The pattern is essentially the

same in all cases.
Tax-year Noun /ˈtæks jɪə(r)/ It’s a period of twelve months over
which the accounts and taxes of a
company or a person are
calculated.(năm thuế)

EX:
company to continue tax after a tax-
year.
Scenario Noun /səˈnɑːriəʊ/ It’s a description of how things might
happen in the future. (dự đoán)

EX: Let me suggest a possible

scenario.
Temptation Noun /tempˈteɪʃn/ It’s the desire to do or have something
that you know is bad or wrong.(cám dỗ)

EX: Don't put temptation in her

way by offering her a cigarette.
Tough Adjective /tʌf/ It’s having or causing problems or
difficulties. (khó khăn)

EX: It was a tough decision to make.

Robust Adjective /rəʊˈbʌst/ It’s strong; able to survive being used
a lot and not likely to break. (mạnh
mẽ)

EX: She was almost 90, but still very

robust.
Down- Noun /ˌdaʊn It’s a sum of money that is given as
payment the first part of a larger payment.
ˈpeɪmənt/
(khoản thanh toán)

EX: We are saving for a down-

payment on a house.

 Sumarry:
Combining saving early and save tax-efficiently with a robust rate of return and
the results may well surprise you. Compounding is earning extra returns on
your returns in a line that curves up and keeps getting steeper . It means that
your savings can grow. If you’re in a low tax-bracket, and expect to be in a
higher one in future, a Roth IRA can be a good idea with the maximum you can
put into a Roth in any tax-year is currently $5,50. Of course, this technique is
not without its challenges. Firstly, there are still things to spend money and
you don’t have strong saving. Then aside from saving enough, simply earning
enough with a teenage job can be a challenge too. Because they money they put
aside will help them with college first, or perhaps a down-payment on a home.
Retirement is a long way off when you’re a teenager.