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In which John celebrates financial independence by explaining how minimum-wage summer jobs can become incredibly lucrative if only you save some of your money in a retirement account. In the US, the most common retirement accounts are called IRAs (IRAs have tax advantages), but any investment account will do. Just sock the money away in a low-fee diverse mutual fund, wait 50 years, and enjoy the magic of compound interest.

Caveat: Obviously, I am not a financial advisor or investment professional. I am a novelist. Also, while it's a good idea to start an IRA in high school for most people, it may be a BAD idea if you're planning to seek financial aid from a private college in the US, because they might count your retirement savings against your financial aid application. (If you attend or will attend a public university, this is unlikely to happen according to my research, although again, I am a novelist, not a banker.)

There are a LOT of nerdfighters in the voting round for YouTube NextUp Europe. You can vote here:

Nerdfighters to vote for include:

missxrojas (who gave The Fault in Our Stars its title)

EDIT: Islamic banking does not use interest, so this particular piece of financial planning advice does not hold water in the Islamic world. (But I still advocate for beginning to save early!)


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A Bunny
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Good morning Hank; it's Monday, July 4, 2011. It's Independence Day here in the United States, and today I'm going to talk about financial independence, specifically how young people can turn their crappy summer jobs into hundreds of thousands of dollars... or the equivalent in euro, pounds, rial, yen, whatever. By the way, Hank, I'm dressed up and giving financial advice because I was in The Wall Street Journal last week, which means that I am now technically an expert in money. Okay, Hank, so when I was in high school, I worked at a warehouse stacking stereo equipment of various shapes and sizes into semi trucks. And the game was that you had to fill the semi trucks as much as possible in order to minimize the number of semi trucks that it took to move the stereo equipment around. It was basically like manual labor Tetris. Really, it was more like manual labor Tetris in an un-air-conditioned, 110 degree warehouse with a lot of people yelling at you about how much you suck at Tetris. Also, I made $7.50 an hour, which is by no stretch of the imagination a living wage, unless you have someone paying for your food, clothing, and housing. Okay, so let's say you make $7.50 an hour at your crappy summer job. That's $247 dollars a week in take-home pay. You probably work about 10 weeks over the summer; you would work 12, but your parents are making you go on a crappy summer vacation to like, Mount Rushmore or something, and they're gonna fight the entire time about your dad's driving, and there won't be 3G internet half the time, and you won't be able to talk to your friends, and it's gonna suuuuck! On the other hand, they did pay for your diapers all those years ago. So, $247 a week over 10 weeks. I'm not a mathematician, Hank, but I think that's $2,470 over the course of the summer. 'Course, you're going to have to spend some of that money - you gotta put aside some money for Hank's new album, Ellen Hardcastle, you're gonna have to see Deathly Hallows, you're probably gonna go out to dinner with your friends a few times... Let's say, you know, 500 bucks. Okay, so that leaves you with $1,970. This is the part where I want you to go to the bank and set up an IRA, which is not an Irish Republican Army, but an Individual Retirement Account. If you don't live in the US, they call it something different, but there are equivalents from Brazil to Europe, pretty much everywhere. Hank, I'm a very fancy and highly-trained economist, so I'm not sure this explanation is going to make sense to you, but an IRA is essentially a machine that produces money using nothing but time. How does it do it? Through the magic of compound interest. So let's say you have a $10 investment that you're somehow making 10% on. At the end of the year, you've made a dollar in interest, and you have $11. At the end of the next year, you get 10% of that $11, which is $1.10, and your interest just goes up and up and up and up. So let's say between the ages of 16 and 19 you're able to put away $1,970 a year into an IRA account, and then you do nothing for 50 years. We know that the world economy grows, when adjusted for inflation, about 6.5% a year over the last 100 years. That means that at the end of 50 years, when you retire at the age of 69, your $5,910 will have turned into more than $162,000, and yes I am adjusting for inflation. $162,000 from stupid, getting yelled at, manual labor Tetris! But realistically, you probably can't put away $2,000 a summer. I mean, you may have to save for college or you may have to help out your family. You may have to pre-order 26 copies of The Fault in Our Stars. So let's say between the ages of 16 and 21 you put away $400 a summer, for a total of $2,000. You still have more than $50,000 when you retire. That means when it's all said and done you didn't make $7.50 an hour flipping burgers, you made $125 an hour. But now let's say I, tottering old man that I am at 33 years old, put away $2,000 today. I'm still 37 years away from retirement, but what happens if I put away $2,000? It's only worth $20,000. That's compound interest at work. That's why it's more important to save early, to maximize the number of years that the interest can compound, than it is to save lots. At a lot of banks, you can open up these accounts for, like, $100. And the bankers are always happy to help you because they get paid for each account they open. So there really is a way to turn a crappy summer job into a lot of money, although it's going to take a while. In short, Hank: you don't have to be a rich person to do the things that rich people do to maximize their income and avoid taxes. Alright Hank, before I answer the pressing question of whether my suit is all business, there is one outstanding issue: YouTube NextUp Europe. There are a lot of nerdfighters who made it to the voting round of YouTube NextUp Europe, including Rosianna, who is responsible for the title of The Fault in Our Stars. I've put links to entries from known nerdfighters in the doobly-doo. It's really easy - you just click thumbs-up. But the most important thing is that you watch all the videos and vote for your favorites because you have a chance to shape the future of YouTube, and that's something you should take seriously. I hope that you do. I watched every single video and I hope you will, too. I made a poem. It's not. I'll see you on Wednesday.