Rich Dad Poor Dad
By Robert T Kiyosaki
Author Robert Kiyosaki wrote this book to pass on what he has learned about money. It’s his belief that financial literacy isn’t taught in schools, it’s something that’s learned in life out of school, but not everyone receives the same level of education. As the sub-title suggests, he has found that rich parents teach their children differently to poor and middle class parents when it comes to money, and the contents of the book are the lessons he learned from his two “dads” – his own poor dad and the rich dad of his good friend. He writes: Being a product of two strong dads allowed me the luxury of observing the effects different thoughts have on one’s life. I noticed that people really do shape their lives through their thoughts… The lessons are meant not to be answers, but guideposts that will assist you and your children to grow wealthier no matter what happens in a world of increasing change and uncertainty.
My Top 3 Takes from the Summary
Only by generating income that doesn’t come from a pay check, and therefore having your money create money, can you be truly financially free.
Money is one form of power. But what is more powerful is financial education.
It’s not the grades you achieve in school that will shape your future, but rather the amount of guts, audacity, bravado, or brilliance you put into what you do when your school days are done.
What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
The chapters of this book detail the six key lessons Robert Kiyosaki learned from his “rich dad” over decades of mentorship, and he states that he has tried to convey them as simply as possible, just as they were taught to him as he was growing up.
The Rich Don’t Work for Money
The author’s “rich dad” was the dad of his best friend Mike. He was the owner of nine grocery stores, and in return for being taught about money, Mike and Robert worked as shelf stackers and tin dusters in one of them. They were being paid a meagre wage, but it wasn’t long before Robert became frustrated with the arrangement. He felt he was working very hard and receiving no education in return, so he told Mike he intended to quit. The response he got was quite different to the one he’d imagined as it seemed Mike had been waiting for him to say he’d had enough, and a meeting with Mike’s dad was arranged.
During the meeting, “rich dad” helped Robert to understand what he had been learning as he worked. The lesson was that most people spend their lives working for others. If, like Robert, they become unhappy with the terms of the job or the amount of money they make, most will simply leave that job and search for another one. They do this because they believe that earning more and continuing to work their way up into better paid positions will solve all financial problems, but this, according to Mike’s dad, is flawed thinking. He believes that thinking this way can only lead to being controlled by fear and greed because the more they earn, the more they spend, now considering themselves able to afford more luxuries in life. When you get caught up in this cycle of having to earn more to pay for more, you’re caught in what’s known as “the rat race.” The message “rich dad” wanted Robert to receive was that the only way to avoid getting caught in the trap is to think differently about money. The author describes this message as a pivotal point of view, and the first of six key lessons: The poor and the middle class work for money. The rich have money work for them. Only by generating income that doesn’t come from a pay check, and therefore having your money create money, can you be truly financially free.
Why Teach Financial Literacy?
Having noticed that his two dads thought about money in very different ways, and that people really do shape their lives through their thoughts, the author writes: Once I made up my mind about whom to listen to, my education about money began… Money is one form of power. But what is more powerful is financial education. Money comes and goes, but if you have the education about how money works, you gain power over it and can begin building wealth. The reason positive thinking alone does not work is because most people went to school and never learned how money works, so they spend their lives working for money.
To add weight to this point of view, he draws attention to the number of stories we hear of people inheriting a fortune only to die penniless, or of people winning huge sums of money only to end up in huge amounts of debt. His rich dad told him that if he wanted to be rich, he needed to be financially literate, and that it’s lack of financial literacy that leads to these sad stories of debt. Becoming rich is not the answer; an understanding of how money works is needed to stay that way. Schools don’t teach financial literacy, and in American schools, the American Dream of owning a suburban home is promoted as financial security. However, Robert believes that most home owners don’t actually have an asset, they have a liability. Wealth is found in buying assets, not liabilities, so it’s clearly important to know the difference between the two. He writes: An asset puts money in someone’s pocket. A liability takes money out of someone’s pocket. He also adds that many of those working hard to earn more and get ahead fail to do so because they spend their lives buying liabilities instead of assets. He lists mortgages, car loans, credit card debt, and other loans as common examples of liabilities, and real estate, stocks, bonds, notes, and intellectual property producing rental income, dividends, interest, and royalties as examples of assets.
Mind Your Own Business
The meaning behind this lesson title is explained when the author writes: To become financially secure, a person needs to mind their own business, not someone else’s business. He further explains what he means by saying that there’s a difference between your profession and your business. It’s his belief that educational establishments teach people to become professionals, whether that’s a professional chef, engineer, scientist, or any other field. Then, when they’re asked what their business is, they’ll reply with their professional title. However, someone might say they’re a banker, but they don’t own the bank. They earn an income in their profession as a banker, but they’re actually making money for the bank, thereby they’re confusing their profession with their business. The message here is that your business is really only your business if it ‘revolves around your asset column, not your income column,’ and, reinforcing lesson one, your income needs to be creating money, so it needs to be going into the purchase of income-generating assets.
The History of Taxes and the Power of Corporations
The author’s rich dad encouraged him to study the history of taxes, helping him to learn that the government ‘drives tax revenue from the middle class.’ As the government grows bigger, more revenue needs to be raised, but, according to “rich dad”, the rich don’t play by the same set of rules as everyone else. By establishing corporations, they are able to shield themselves from a large tax burden. He writes: This knowledge of the legal corporate structure is what really gives the rich a vast advantage over the poor and the middle class. He explains that a corporation is not a big building, or a factory, or a group of people, it’s merely a legal document that creates a legal body without a soul, but it’s a body that protects the wealth of rich people by providing tax shelters that individuals don’t have access to. The message here is that rich people creating corporations are taxed at lower rates than other individuals, which means they keep more of their money than middle class and poor people.
The Rich Invent Money
An observation made by Robert in his professional teaching career is that no matter how much potential an individual possesses, a lack of self-confidence can still hold them back in life. He believes everyone experiences fear and self-doubt to some degree, and it’s this that gets in the way of taking risks – something he notes the rich do, but the middle class and poor don’t. He writes: Financial genius requires both technical knowledge as well as courage, and he comments that it’s not the grades you achieve in school that will shape your future, but rather the amount of guts, audacity, bravado, or brilliance you put into what you do when your school days are done. Of course, these things require confidence.
In saying that the rich ‘invent’ money, he means they create their own luck. He points out that at one time in history, those who owned the greatest amount of land had the greatest wealth, and then this changed to become those who sold the most merchandise. In today’s world, those who can think up ideas and put them into practice are the ones creating money because the Information Age naturally favours those with information. Putting energy into developing financial intelligence holds the key to taking advantage of new opportunities as they come along in an ever-changing world. History has taught us that markets will inevitably crash as well as boom, but, in the author’s words, having financial intelligence keeps you ready to take the lemons and turn them into millions.
Work to Learn – Don’t Work for Money
The author’s “rich dad” promoted a philosophy of knowing a little about a lot. Robert took this advice and applied it in his life by learning a variety of skills in a variety of different roles, including jobs in the many companies owned by his “rich dad”, graduating from the US Merchant Marine Academy, working on an oil-tanker, learning to fly by joining the Marine Corp, and then learning how to sell by working at Xerox. He points out that this philosophy goes against the norm in terms of educational and professional systems that promote specialisation in one area. This might be specialising in medicine as a doctor, or specialising in law, engineering, architecture, or any other career path, but his advice to young people today is to look ahead, decide what it is they really want to do, and then find a way to learn the skills they need to achieve it. In adopting his “rich dad’s” philosophy, he was learning a diverse set of skills that he could use to maximise his earnings, an approach his “rich dad” praised him for, but his own dad couldn’t understand, seeing it as too much moving around. In short, Robert advises adopting an approach of working to learn something new, rather than just working for money.
The author considers being the product of two “dads” to have been a luxury in terms of observing how different ways of thinking can impact your life. He writes: My poor dad always said, “I’ll never be rich.” And that prophecy became reality. My rich dad, on the other hand, always referred to himself as rich. He would say things like, “I’m a rich man, and rich people don’t do this.” Even when he was flat broke after a major financial setback, he continued to refer to himself as a rich man. He would cover himself by saying, “There is a difference between being poor and being broke. Broke is temporary. Poor is eternal. My poor dad would say, “I’m not interested in money,” or, “Money doesn’t matter.” My rich dad always said, “Money is power.”
Now 25 years since its first publication, this updated and revised edition published in 2022 brings the reader additional information that’s relevant to today’s world, but the original content remains as powerful as ever. Designed to pass on the financial education that helped shape his own life, the author offers time-tested advice to help everyone grow wealthier in a world of increasing change and uncertainty.
The personal stories and anecdotes help to keep this book an easy read, and the financial education passed on by the author through his own experiences will resonate with readers in a way that inspires action.
Bio of the Author
Robert Kiyosaki is an American entrepreneur, businessman, author of over 25 books, and founder of The Rich Dad Company, a private company providing financial education through books and videos.