Robert Kiyosaki on Saving, Passive Income and Real Estate

Rich Dad, Poor Dad author Robert Kiyosaki, whose latest book, Second Chance for Your Money, Your Life and Our World (Plata Publishing) offers more in-depth tips for rethinking how we approach money matters.

You’ve said, “Savers are losers,” but most financial experts recommend keeping a savings emergency fund. Can you explain a bit about that?

Perhaps a better way to explain my statement that, today, “savers are losers” is to make a distinction between “saving’” and “investing.” Having a cash reserve—an emergency fund or savings account—is responsible planning and cash management and can give us peace of mind in the event of an emergency or unplanned expense. That’s being smart with our money. And that’s what financial education is all about: getting smarter and making smarter, more informed decisions.

So, should you have an emergency fund that’s liquid? Absolutely! Should it be a “saving account” that you can access immediately if needed and large enough to allow you and your family to ride out financial speed bumps, for six (even nine) months? For most people, the answer is yes.

That said, I see a true distinction between saving and investing. The liquidity and flexibility that “savings” offers is one thing, but a plan to grow your wealth is another story. That’s a plan for investing. And today, I believe, we need both.

Years ago (and as recently as the 1970s) you could grow your saving account “asset” and leverage compounding interest with passbook savings accounts that earned double-digit interest and were insured by the federal government. Today it’s a different story…and a savings account (earning interest that in most cases isn’t even out-pacing inflation) can be a losing proposition.

In today’s world—apart from an emergency fund or financial cushion—the advice to “save money” is old and obsolete advice, from an investment standpoint.

What other kinds of money-making assets could people acquire besides real estate?  You mention books (and earnings from royalties) but not everyone is capable of or interested in writing a book. Also, many books sell small numbers. Any other ideas for “passive income”?

Technology has leveled the playing field in so many ways, especially when it comes to taking a germ (or a gem!) of an idea and turning it into an income stream. Today, web-based businesses are among some of the largest and most successful in the world and entrepreneurs in every corner of the world are leveraging technology to share ideas, create businesses, and market and sell existing products and services.

I like the example of writing and selling an e-book, not because I write books but because of the ease of entry and execution in that marketplace and space.

One of our employees actually did a case study on “creating an e-book asset” and learned how to write, produce and sell an e-book, and then wrote an e-book on that subject. Today, many e-books are as much about communicating ideas and teaching as they are about books—and you could create one on a subject that you know a lot about or something new you have learned. Or, you can challenge yourself to find an underserved audience or a need with promising opportunities.

Best of all, exploring an idea like this (even if you never actually produce or sell an e-book) opens your mind to opportunities for making money, opportunities that our eyes often miss. Training your mind to see opportunities is the first step to creating or acquiring assets.

Another option for passive income is stocks that pay dividends. Research a few stocks that pay dividends and buy a share or two. In addition to the dividend income, you’ll learn about how investing in paper assets works and, ideally, the market conditions that can influence stock prices and dividends. You’ll probably come across some words that are new to you and this will give you the chance to learn the language of money related to paper assets—and expand your vocabulary and your thinking.