About The “Lessons From” Series
The “Lessons From” series are bite-sized summaries of books about financial literacy for parents raising money-smart kids.
Today with Summary #3, we continue the series on a book called Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki, Sharon L. Lechter. (Link to Summary #2)
Chapter 2 – Lesson 2: Why Teach Financial Literacy
The author explains why financial literacy is so important, and the secret to how the rich really do "get richer":
- I am concerned that too many people are too focused on money and not on their greatest wealth, their education.
- Most people fail to realize that in life, it’s not how much money you make. It’s how much money you keep.
- “If you want to be rich, you need to be financially literate.”
- Rule #1: You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know.
- “Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets".
- ...“assets put money in your pocket.” Nice, simple, and usable.
- If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities.
- Because students leave school without financial skills, millions of educated people pursue their profession successfully, but later find themselves struggling financially.
- They don’t understand that their trouble is really how they choose to spend the money they do have. It is caused by financial illiteracy and not understanding the difference between an asset and a liability. More money seldom solves someone’s money problems. Intelligence solves problems. There is a saying a friend of mine says over and over to people in debt: “If you find you have dug yourself into a hole... stop digging.”
- ...schools were designed to produce good employees, instead of employers.
- Why the rich get richer? The asset column generates more than enough income to cover expenses, with the balance reinvested into the asset column. The asset column continues to grow and, therefore, the income it produces grows with it.
"The real tragedy is that the lack of early financial education is what creates the risk faced by average middle-class people. The reason they have to play it safe is because their financial positions are tenuous at best. Their balance sheets are not balanced. Instead, they are loaded with liabilities and have no real assets that generate income. Typically, their only source of income is their paycheck. Their livelihood becomes entirely dependent on their employer. So when genuine “deals of a lifetime” come along, these people can’t take advantage of them because they are working so hard, are taxed to the max, and are loaded with debt.
... the most important rule is to know the difference between an asset and a liability. Once you understand the difference, concentrate your efforts on buying income-generating assets.
...remember this simple observation:
- The rich buy assets.
- The poor only have expenses.
- The middle class buy liabilities they think are assets."
Coming Next Time… LESSON 3: MIND YOUR OWN BUSINESS
Or dive right in yourself:Rich Dad Poor Dad: What The Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
P.S. This book summary has been completely rewritten and published on the Kindle platform. If you’d like to have this summary available at any time on your Kindle app or device, it’s available here.