Wisdom of Rich Dad

Robert Kiyosaki made a bold claim that the education system in the US did not teach financial knowledge because they did not want people to find out the truth!

What is this truth?  Watch this video.

I realized that one of the minor points that Robert Kiyosaki mentioned in his Rich Dad book is to avoid credit card debt.  I was feeling a bit puzzled why he mentioned that and not those other debts like personal loan, business loan etc. 

That is until I begin to see reports and reports of how people all over the world are abusing credit card and incurring hugh amont of debt as a result of it’s high interest rate.

More surprising to me, people are not aware of the high interest rate of credit card and unbelievably, there are even those who have the wrong idea that credit card need not be repaid at all!  Shocking!

In England, a report confirm this trend in the younger generation and attributed this to the bad credit habits the older generation, which got passed to the next generation.

Following is an extract from the report: 

Following a report into the borrowing beliefs of teenagers, an investment expert has said that children should be educated and not bullied into saving money if they are to avoid a life of bad debt.

Ben Yearsley, from Hargreaves Lansdown, said that the young people’s lax attitude towards spending and debt is probably a reflection of their parents’ habits.

His comments follow a survey from the Personal Finance Education Group (pfeg) that found the majority of teenagers in England have been or are in debt by the time they are 17-years-old and have a “worryingly laidback” approach to money.

Mr Yearsley said that the 1.25 trillion of personal debt among the adult population is a bad example to children, a fact that parents “need to think about” before making their children behave more responsibly.

“I don’t think it is necessarily about forcing children to save it’s educating and teaching them about what is going to be needed later in life,” he said.

One of the most significant findings of the pfeg survey is that some teenagers think that credit card credit debt does not need to be repaid at all.

Experts are concerned that a lack of understanding on such matters will lead to a rise in individual voluntary arrangements and bankruptcies, which will impact on people’s ability to borrow credit in the future.

Seems like a case of “like father, like son”.  Your children financial behaviour will be a reflection of your financial habits. So how is your financial habits and what financial habits do you want your children to have?

Robert Kiyosaki and Donald Trump co-authored the book “Why We Want You To Be Rich”.  I have not got the chance to read the book, but found this book review from USA TODAY, which seems to suggest that it is more inspiring and motivational than a “How to” guide to become rich.
—-

By Kerry Hannon, Special for USA TODAY

Donald Trump and Robert Kiyosaki say they want you to become rich, but don’t expect any magic formula in Why We Want You to be Rich.

Trump, the ubiquitous mega-real estate developer and star of The Apprentice, and Kiyosaki, author of the giant best seller Rich Dad, Poor Dad, decided to write a book because they share the same concerns about some “serious financial problems” facing our world.

  Among the pressing ones:

  • The rich are getting richer, and everyone else is getting poorer.

  • The value of the dollar is falling.

  • The national debt is increasing.

  • Oil prices are rising.

  • Jobs are being exported.

But there is something bigger than all that: We have developed an entitlement mentality as a nation:

• “This entitlement mentality is a monster problem” — Trump.

• People just can’t “expect a handout from the government” — Kiyosaki.

• “Donald and I hope we are wrong, but we sincerely believe America is in trouble” — Kiyosaki.

The dynamic duo’s mission: Get readers to raise their “financial IQs.”

In the introduction, they write that their book is not a how-to. If you want more help from them, you probably need to buy an online course from Trump University, www.trumpuniversity.com, or purchase Rich Dad learning products at www.richdad.com.

Ka ching.

The bulk of the book is carried by Kiyosaki (and his ghost writer), with Trump (and his ghost writer) chiming in at the end of each chapter. A warning at the start is worth noting: “If you believe that working hard, saving money, investing for the long term in mutual funds and diversifying is good advice then this book may not be for you.”

They denounce the “passive investor mentality” of maxing out on 401(k) contributions, paying off a mortgage quickly, paying off credit cards and having a balanced portfolio of mutual funds.

While this might sound like good advice for “financially unsophisticated people,” according to this duo, you won’t get rich without using debt as leverage, say, borrowing to buy real estate or invest in a business.

That may be true for astute borrowers like Trump and Kiyosaki, who know how to “borrow money and get richer, not people who borrow money and get poorer.”

But using debt wisely can be tricky. They do caution that you need to take the time to get financially smart “to know when to use debt and when not to.”

Diversification is not the way to get rich either, according to this book. It is a “defensive posture,” contends Kiyosaki. “Personally, I do not diversify,” writes Kiyosaki. “I would rather focus. I invested in real estate until I was successful. Today, I still invest in real estate.”

Although it’s easy to dismiss the book as a product of the egos of two super-successful men, there are points worth noting.

“Donald and I are concerned that most people do not choose to learn to manage their own money or learn to invest their own money,” writes Kiyosaki. “Instead of learn, they simply turn their money over to experts and then hope and pray their experts are truly experts.”

This is a legitimate concern.

Control is a key to getting rich, according to this book. As entrepreneurs and real estate investors, they seek control over six factors: income, expense, asset, liability, management and insurance.

In the end, Trump and Kiyosaki pass on some generic recommendations:

•  College students should study accounting and business law, so not to be fooled by people who position themselves as “experts,” but are not really investors.

•  You have to love what you do in order to be successful at it.

•  Invest in what you love.

•  If you want your wealth to grow, go to a place where people are getting rich (such as a real estate office or stockbroker’s office), join an investment club, or start a study group and meet new friends who also want to grow richer.

For those who have read Robert Kiyosaki’s “Rich Dad, Poor Dad” and his other works, you would by now know that to be able to achieve your financial success, you need to have money work for you by investing them.  You need to be an investor.

For some, the words investing and investment give them the impression that you need to have a great sum of money to start with.  Something which they think that only the rich can afford to do, to invest in.

However, Yahoo Finance on 19 Feb debunk this false impression.  Yahoo Finance wrote of how a 8 years old crafted a simple and winning portfolio with just a few thousands dollars.

Here’s how Kevin Roth, an 8-year-old second-grader got started. He got a gift from grandma and a few hints from his father, Allan, a no-nonsense financial planner in Colorado Springs. It’s a simple portfolio of three no-load, low-cost index funds.

Yes, it does cost a minimum investment of $3,000 in each of the funds, for a total of $9,000. But my advice to David is: You have to start somewhere, so shoot for this one.

Click here to see the portfolio.

Please note that this second grader’s portfolio not only beat the S&P 500 by two percentage points last year according to Morningstar’s data, it actually beat all five of our lazy portfolios in 2006, so we may add it to our list!

Here’s how Allan describes the advantages his son has over most adults:

• The calculations suggest Kevin’s portfolio beats 95% of professional portfolios (the worst performing of the three funds beat 65% of its peers) in 2006. 
• By owning the entire market, Kevin will beat the average dollar invested because his costs are so low. 
• Don’t confuse owning lots of funds with being diversified; three’s enough. 
• Kevin has other advantages over adults: He doesn’t go to cocktail parties where people brag about their investments. 
• No financial planners (a.k.a. salespeople) call on him to exploit emotions. 
• He doesn’t watch the financial shows on TV — doesn’t even know who Jim Cramer is.

The point is: Bite the bullet. It’s time for some discipline, so forget about a new plasma TV and focus on a starter portfolio. There are a million ways to procrastinate … but I promise you, once you start, it gets progressively easier (set up automatic deductions from payroll and get used to living on less). Just start! Do something! Action! Put a hundred bucks in the cookie jar. Buy one fund. Take responsibility.

 

Moral of the story?  If a 8 years old can invest, so can you!  Age is not barrier to investment and so is the amount of money you have.  If you have little, invest with what you have.  Start somewhere and get going.  No one except you are responsible for your own personal financial success.

 

Financial literacy has been the main point that Robert Kiyosaki has been stressing in most of his ”Rich Dad” series books.  One of the ways to solve the financial literacy issue is to educate the young from small the principle of money.

As young kids remember and learn faster through fun ways, what better way to teach the finacial and money matters than through cartoon animations.

Here’s a cartoon music animation to teach kids about finance and investing. 

Robert Kiyosaki has been stressing about the importance of financial literacy and the lack of financial knowledge among the general population in the U.S. through his “Rich Dad” book series. 

The lack of financial knowledge is an issue not just the U.S. but everywhere. 

Australia news portal, The Age (theage.com.au) reported that:

One in seven Australians are banking on winning the lottery to deliver them financial security.

A new poll, released to coincide with a campaign to boost Australians’ financial literacy, has also found 8 per cent of people think the best place to put their savings is in a jam jar under the bed.

The Federal Government today will launch its campaign that is aimed at making Australians more aware of the importance of knowing how to manage their money.

15 per cent of the population are banking on winning the lottery to help them reach their main financial goal. Among people earning less than $70,000, 18 per cent are hoping for their numbers to come up.

The chances of picking the numbers in a 45 ball lottery is about one in eight million.

Three per cent of men and one per cent of women said their main financial goal was to buy a flat screen plasma TV.

When it came to where best to put your savings, 44 per cent of those quizzed said a high interest bank account was the way to go. Another 28 per cent backed a regular bank account.

But just 9 per cent said a managed fund, six per cent thought shares, and eight per cent (including 10 per cent of women) said a jam jar under the bed.

I too has the dream of winning the lottery to jumpstart my wealth building.  And I recommend using a buscuit tin instead of a jam jar under the bed.  The buscuit tin can contain more than the jam jar!