fiscal education is not usually part of the curriculum
in our nation’s schools, according to robert kiyosaki
(with sharon l. lechter)
in rich kid smart kid: giving your child a financial head start,
but it should be
and inshaAllah, it’s gonna be a part of ours.
in the hands of a more astute writer,
this book would have been mind-blowing.
he includes a lot of vignettes from his life and talks with both his rich and poor/smart dad,
but fails to coalesce the most important points into a clear, illustrative, organized picture.
but if you’re fan of the rich dad, poor dad series,
i guess you might like it.
should you read it,
the appendix written by lechter
is not to be skipped.
it offers many practical exercises
to increase your child’s financial awareness and education.
a more in-depth review
at first he delves into finding your child’s natural genius and learning style so that you can help them exploit those to her/his advantage. usually in schools, one type of genius or learning style is considered more valuable than others,
and the others are labeled with acronyms like ADHD and the child given drugs in order to mold them into the acceptable genius/learning style.
as far as geniuses, kiyosaki mentions howard gardner‘s frames of mind, who list 7 geniuses or intelligences:
- Linguistic intelligence (as in a poet);
- Logical-mathematical intelligence (as in a scientist);
- Musical intelligence (as in a composer);
- Spatial intelligence (as in a sculptor or airplane pilot);
- Bodily kinesthetic intelligence (as in an athlete or dancer);
- Interpersonal intelligence (as in a salesman or teacher);
- Intrapersonal intelligence (exhibited by individuals with accurate views of themselves).
kiyosaki says that instead of saying “i can’t afford it”, say how can i afford it?” constantly saying the former reinforces our self-perception as a poor person, while saying the latter reinforces ones self-perception as a rich person. “…when your child asks you for money, you may want to say, ‘Write me a list of ten different things that you can do, legally and morally, so that you can afford what you want without asking me for the money.’…’How can I afford it?’ opens your mind to examining the possibilities of attaining what you desire.” (p. 42)
much of the information is recycled/reiterated from kiyosaki’s previous books especially rich dad poor dad, things like:
- using your spare time to build wealth/buy assets,
- using your paycheck to build wealth rather than increase your liabilities/debt,
- investing in real estate as a formula for wealth.
- paying yourself first
(like the 70-10-10-10 principle where you spend 70% on wants and needs, save 10%, give 10%, invest 10%)
- thinking about the long term consequences of each purchase
kiyosaki suggest playing games to teach children. he quotes the motley fools:
The act of acting and winning, or failing and learning, is an act that emerges naturally from the playing of games. kiyosaki played monopoly almost religiously as a youth, and has developed his own game, called cashflow and cashflow for kids. in general, including your child in monthly/daily household financial activities — like having the watch you pay the bills, or being involved in the family’s home-based business — can teach children value lessons on earning, managing and growing wealth.
in chapter 5, kiyosaki talks about winning formulas, or your personal method of learning and doing well in life. he says that a child needs, at minimum, three primary winning formulas: learning, professional and financial. he advises letting your child find and use their own genius because “the real world requires multiple geniuses to survive.” he reminds parents that one of their most important jobs is to “make sure that the child preserves his or her God-given love of learning. Find out your children’s natural genius, find out what they are interested in learning, and keep them excited about learning, even if it is not in school.”
in chapter 6, kiyosaki explains the importance of having a winning learning formula. because people no longer stay in the same job for their entire career, it is important to use your winning learning formula in order to train for your next career. the old, tired, false mantra of “Go to school, get good grades, and get a safe, secure job.” is not going to work in the modern era: “…most people who follow that advice wind up in a dead-end job. They may have good grades, and they have found a safe, secure job, they may earn a lot of money, but the problem is, the job does not come with a ladder.” they eventually end up burned out, frustrated and tired. “[I]t is important to let children your know that their ability to change and learn quickly is probably more important that what they are learning in school today…A parent today must share the child’s vision of the future rather than force the child to see the parent’s vision of the future, a vision that is often based on the past.”
to illustrate this idea, he list a comparison of ideas:
|industrial age||information age|
|job security, tenure||free agent, virtual companies|
|seniority||paid for results|
|one job||many professions|
|work until sixty||retire early|
|punch a time clock||work when interested in working|
|degrees and credentials||core talents|
|old knowledge||new ideas|
|company retirement plans||self-directed portfolio|
|government retirement plan||don’t need it|
|government medical plan||don’t need it|
|work at company||work at home.|
in chapter 7, kiyosaki talks about the lack of applicability of the education he received from the school system:
“Mentally I was going back and forth through the looking glass. The problem was, the world I was entering, the world of my rich dad, seemed to make sense. The world I was leaving seemed to be the world that seemed insane…On Mondays the teacher would ask us to hand in our homework. She would then hand out more assignments and ask us to study things I really could not see, touch, or feel. I was asked to study subjects that I knew would never use. I would solve complex math problems and know that I would probably never need to use such complex math formulas in real life. I saw how much math my rich dad used to buy his green house, and he did not use any algebra formulas to buy it. Simple addition and subtraction were all it took. I knew that buying those four green houses was not that hard. Once I had the four green house to sell, buying the one red hotel seemed easy, even logical — but it made sense only if you really wanted to get rich and have more free time. I was confused, because each time I went through the looking glass one side definitely looked much saner to me than the other.”
kiyosaki flourished under his rich dad teaching method where he allowed the young kiyosaki to act first, make mistakes second , and then listen his rich dad’s lessons third. then, after the lesson, he would give kiyosaki a choice of what to do with the lesson he learned.
kiyosaki — who, i must point out, has no children of his own — is not suggesting we take our children out of school and buy a monopoly game, but that we, as parents, supplement the basic scholastic, learning and professional skills with basic financial skills, the lack of which will “keep many people working hard, clinging to job security, and never getting ahead financially…most people do not get rich by working hard for money and job security.” however when kiyosaki himself saw the difference in pay scale between a high school graduate and a college graduate, it was incentive enough for him to stay in school, but he also understood that most schools teach their students to seek skills in order to be an employee, while he believes having financial skills allows one to have the choice of being an employer or an employee. instead of training the mind to find a job, we should train our minds to look for things that make us rich. but, kiyosaki concedes, that he realized that if he wanted to be the employer, he would not only have to study the subjects that are taught in schools, but he would also need to learn more that what is taught in school.
citing a report from the US department of health, education and welfare, kiyosaki shares some dismal statistics: out of 100 people, at the age of 65, 1 is rich, 4 are comfortable, 5 are still working, 56 are needing government or family support, and the rest (34) are dead. he also shares an article from USA Today in which an analyst calculated the odds against making $1 million seven different ways:
owning a small business – 1,000 to 1
working for a dot-com that goes public – 10,000 to 1
saving $800 a month for 30 years – 1,500,000 to 1
winning a game show – 4,000,000 to 1
playing the slots in a casino – 6,000,000 to 1
winning the lottery – 12,000,000 to 1
inheriting $1 million – 12,000,000 to 1
in chapter 8, kiyosaki discusses the basic relationship between income, expenses, assets and liabilities in a financial statement, the report card of real life.
he suggest starting our children off by getting a piggy bank with boxes for giving, saving and investing. i like this one from moonjar.com:
classic kiyosaki quotes
the book is filled with classic kiyosaki quotes from both his rich and poor/smart dads:
“True intelligence is knowing what is appropriate rather than what is simply right or wrong.”
“Financial intelligence is not about how much money you make, it’s about how much money you keep and how hard that money works for you.”
“You know your financial intelligence is increasing if as you get older your money is buying more freedom, happiness, health, and choices in life.”
“Money is power because more money gives you more choices…Never think that you will be happy when you get rich. If you are not happy while getting rich, chances are you will not be happy when you do get rich. So whether you are rich or poor, make sure you are happy.”
“The less I have to physically work, the more people I can serve, and the in exchange, the more money I can make.”
in the appendix sharon lechter delivers practical advice and activities on kid’s financial education. regarding the common question of giving an allowance to children as practice with fiscal responsibility, there are several challenges. if a parent gives their child an allowance just because… (because they are old enough, they asked for it, or whatever) we risk the child developing a sense of entitlement. if a parent gives their child an allowance “as compensation for completion of specific jobs or tasks” may create an employee mentality. some parents often resort to bribery as a last resort “in an attempt to get their children to perform tasks that should be performed by the children for no financial reward at all.”
instead she suggest a 4-phase strategy. in phase 1, parents “determine certain duties or tasks that…children need to perform for their own personal health and development” like brushing their teeth and making their bed, or clearing the table. in phase 2, parents “determine certain duties or tasks that contribute to the family or social environment that do not result in financial reward“, like setting the table, playing with a sibling. in phase 3 parents can then establish an allowance “to acknowledge the child’s efforts and encourage them in their activities” or as payment for specific tasks. in phase 4, parents should foster their child’s entrepreneurial spirit by encouraging them to think of ways to earn money in the home or outside.
in addition to the above strategy she reiterates the importance of financial literacy including the concepts of assets versus liabilities, delayed gratification, debt and credit cards, setting financial goals and a financial plan, kiyosaki’s “How can I afford it?” philosophy, and having a part-time job.
lechter also list several “financial field trips” including questions parents can ask their children during the process to highlight key ideas. these fiancial field trips include:
- having the children watch while you pay the monthly bills. they watch you as you pay yourself first, pay household bills, pay your mortgage, and then credit cards. encourage your child’s curiosity and have them file bills to establish the habit of keeping good record keeping. schoolhouse rocks “where the money goes” comes to mind:
- develop a budget for a week of meals and have them shop for the food, prepare the meals and analyze the results, and apply the budgeting process for all expenses.
- take them to the bank, pointing out what each worker does. let them deposit and/or withdraw money, review your bank statement, and explain the banks services and what they charge.
- at the grocery store when shopping for food talk out loud about your mental process when choosing one brand over another, comparing price, quality, ingredients and quantity.
- when shopping for a car or appliance “discuss the decision of paying cash or financing the purchase.”
- make an appointment at a stockbroking firm, and ask the stockbroker to explain her/his job. open an account, to boot, but start small! teach your child how to read the financial pages.
- when eating at a chain restaurant, like chick-fil-a, point out how someone owns the land underneath the restaurant, another person owns the building, and yet another person owns the restaurant who probably hired a manager to look after the restaurant, who in turn hired workers. also discuss how all the restaurants look the same no matter which chick-fil-a you go to and that other companies provide the signage, napkins, food containers, and etc. that have a look unique to chick-fil-a.
- go sit in front of an apartment building and explain tenants, rent, the owner’s mortgage and how the tenants pay it for her/him, expenses related to the building’s maintenance, rent collection, tenant issues and property management.
sounds like fun! (no, i’m serious.)