The “Lessons From” series are bite-sized summaries of books about financial literacy for parents raising money-smart kids.

Today 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

Chapter 2 – Lesson One: The Rich Don’t Work For Money

The author’s Rich Dad had a unique way of teaching:

“You work for me, I’ll teach you. You don’t work for me, I won’t teach you. I can teach you faster if you work, and I’m wasting my time if you just want to sit and listen, like you do in school.”

“The poor and the middle class work for money.  The rich have money work for them.”

“I want to teach you to master the power of money. Not be afraid of it. And they don’t teach that in school. If you don’t learn it, you become a slave to money.”

“The pattern of get up, go to work, pay bills, get up, go to work, pay bills… Offer them more money, and they continue the cycle by also increasing their spending. This is what I call the Rat Race.”

“And as you get older, your toys get more expensive. A new car, a boat and a big house to impress your friends.  Fear pushes you out the door, and desire calls to you. Enticing you toward the rocks. That’s the trap.”

“Unfortunately, for many people, school is the end, not the beginning.”

“Great civilizations collapsed when the gap between the haves and havenots was too great. America is on the same course, proving once again that history repeats itself, because we do not learn from history. We only memorize historical dates and names, not the lesson.”

“If schools taught people about money, there would be more money and lower prices, but schools focus only on teaching people to work for money, not how to harness money’s power.”

The author’s rich dad explained that the rich really did “make money.” They did not work for it.

The author’s Rich Dad believed the best reason to get a job was to learn something, not for the paycheck: “Keep working boys, but the sooner you forget about needing a paycheck, the easier your adult life will be. Keep using your brain, work for free, and soon your mind will show you ways of making money far beyond what I could ever pay you.”

The author also created a business when he was only 9 years old that rented a small library of comic books to the neighborhood kids: “The best part was that our business generated money for us, even when we weren’t physically there. Our money worked for us.”

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Coming Next Time… LESSON TWO: WHY TEACH FINANCIAL LITERACY

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!

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College is an in-between time in life, when you are no longer a child but not yet an adult. Many parents continue to support their children financially during these years, and some parents choose to no longer support their children at all. However you decide to handle your college student’s livelihood is a personal decision, but it would be smart to consider handling it in a way that will fairly prepare them for self-support as an adult.

There are a few basic monthly expenses that college students should be made aware of. Examples of these expenses include rent, water, electricity, cable, internet, cell phone, car insurance and gas, health insurance and groceries. Even if you are not expecting your college student to pay for these items, they still should be made aware of the amount of money that is needed to maintain these everyday luxuries.

If your college student seems to have too much time on his or her hands once school begins, ask them to find a part-time job. Many parents worry that a part-time job will distract their children from their studies, but this is often not the case. Maintaining a part-time job gives a college student the opportunity to earn their own money to buy things they may want, like new clothes or concert tickets. Working a low-wage job will also help them understand how difficult it can be to pay for the everyday luxuries listed above. If your child insists that working is hurting his or her grades, ask them to at least find a volunteer or work study opportunity through their college.

The best way to prepare your college-bound child for self-support is to slowly wean them from your wallet. The road to self-support can be a scary and bumpy one, at best. Whether it is before high school graduation or during their college years, you should give them time to make mistakes and learn the ropes.

Here are a few steps my parents took to teach me about self-support:

• To help build my credit, they opened a joint account on one of their credit cards with my name. They allowed me to keep it in my wallet but warned me of punishment for abuse. I was only allowed to use it for emergencies, and I had to pay them for the purchase.
• I was told to get a part-time job in high school. This is how I learned the basics of banking. I had my own checking and savings account, which I over drafted at least five times in the first three months. I got the hang of it, though, and have never over drafted since then.
• I was very fortunate, because my parents paid for everything except the “wants” when I was in college. I was also given a $25.00 allowance for food and gas every week (this was when gas was $0.85 per gallon). To pay for new clothes and other items, I held a part-time job. This taught me the value of smart spending and money management.
• My parents made me aware of the cost of everything they paid for (my tuition, insurance, housing, etc). Knowing this amount made me appreciate what they were doing for me, because I knew that I would never be able to pay for that with my part-time, minimum wage job.

If you use these tips, your child will eventually learn how to take care of themselves, and they will also have a greater appreciation for the things you have done for them. Money will be something they take seriously and use wisely.

Lori Hutchison teaches high school English and owns the site www.mastersinteaching.net.  In her spare time, she enjoys writing guest blog posts about various topics of interest.

One such solution is OpenDNS.  With more than 30,000,000 users and 40,000 schools using it (more than 1% of all internet users), it’s very popular for good reasons.  One of the biggest reasons (well, the biggest reason in our eyes) is the built-in parental control features that protect ANY AND ALL devices in your house that connect to the internet through your home wireless router.  There are other good solutions for just your computers (such as K9 Web Protection, another free solution), but no others that we know of that also provide protection for your tablets, Kindles, iPods, iPads, Androids, gaming consoles, or any other gadget.

The way OpenDNS works is simple.  You make a quick change to the settings of your home router, and after this all your internet traffic will be routed through the OpenDNS servers. Turn on Web Content Filtering in your OpenDNS account, tell it what level of filtering your want (High, Medium, Low, None, or Custom) and immediately all your connected devices will be protected from content in 26 risk categories including alcohol, dating, drugs, gambling, and of course much more.

After this, if any device (computer, tablet, iTouch, etc.) tries to browse to a site that is not allowed, you, your kids, your kids friends, etc. will see a warning message on that device instead of the offending internet site.

Here’s a short description from the OpenDNS folks:

Setting up OpenDNS to secure all of your new devices is as simple as making sure OpenDNS is set up on your router. If you’re already using OpenDNS on your router, you’ll instantly see the benefits on your new devices. OpenDNS settings will apply to the new gadgets whether you’re using OpenDNS simply for fast and reliable DNS or if you’re also using Parental Controls.

It’s easy to add Parental Controls for these new these devices if you now need to block content. As always, there’s no additional software to install and it’s completely free to protect additional devices.To add Parental Controls for the new gadget on your home network, you’ll just need to first make sure OpenDNS is set up your home router. Then, simply log in to your Dashboard, select your home network, and enable the filtering settings of your choice. In just a few clicks, all of your new toys will be protected and you can get back to enjoying them!

FamilyMint doesn’t earn anything from OpenDNS nor do we have any kind of relationship with them.  We’ve just found their service to be great for parents with kids that use technology and we wanted to share it with you.

Hanging out with my 10 and 12 year old nephews last weekend, I heard excitement in their voices when they looked up from their iPod apps and told me about cooking dinner for the family last week.  They told me the great lesson they learned here is that they get to keep the PROFIT.  This means they have to figure out how much the ingredients cost, then price the menu based on how much they want to make.  They get to design the menu and let everyone choose what they want.  Then they go to the grocery store with mom to buy the ingredients, and finally they have to cook and serve the dinner.

Mom was just going to give an allowance anyway; instead, she got to spend quality time with her boys at the grocery store, had dinner prepared, served… and dishes cleaned by her two excited boys.  Now they have money to buy more apps.  The boys gained a greater appreciation for what food costs, that they need to charge more than the costs to make a profit, and what mom’s favorite dish is so they can charge the most for it.

Here’s the menu my nephew created.  Click it to view full size.

The “Lessons From” series are bite-sized summaries of books about financial literacy for parents raising money-smart kids.

Today we start with 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

INTRODUCTION

The big idea behind this book is articulated well by the son of one of the authors:

“Mom,” he continued, “I don’t want to work as hard as you and dad do. You make a lot of money, and we live in a huge house with lots of toys. If I follow your advice, I’ll wind up like you, working harder and harder only to pay more taxes and wind up in debt. There is no job security anymore; I know all about downsizing and rightsizing. I also know that college graduates today earn less than you did when you graduated. Look at doctors. They don’t make nearly as much money as they used to. I know I can’t rely on Social Security or company pensions for retirement. I need new answers.”

The old answer is the Rat Race, “where you work for the owners of a company, for the government paying taxes, and for the bank paying off a mortgage and credit cards. We advise our children to ‘study hard, get good grades, and find a safe job or career’ but the author says this is old, risky advice.  “That is old advice, and it’s bad advice. If you could see what is happening in Asia, Europe, South America, you would be as concerned as I am.” It’s bad advice, he believes, “because if you want your child to have a financially secure future, they can’t play by the old set of rules. It’s just too risky.”

“That’s why it is foolish to simply say to a child, ‘Get a good education,’ ” he said. “It is foolish to assume that the education the school system provides will prepare your children for the world they will face upon graduation. Each child needs more education. Different education. And they need to know the rules. The different sets of rules.”

How can the education system teach a subject that it does not know?”

The author claims that the rich teach their children differently.

Chapter 1 – Rich Dad, Poor Dad

“Money is not taught in schools. Schools focus on scholastic and professional skills, but not on financial skills. This explains how smart bankers, doctors and accountants who earned excellent grades in school may still struggle financially all of their lives. Our staggering national debt is due in large part to highly educated politicians and government officials making financial decisions with little or no training on the subject of money.”

The author’s “Rich Dad” was actually his friend’s dad that taught him lessons about money for over 30 years.  He noted, “Although both dads worked hard, I noticed that one dad had a habit of putting his brain to sleep when it came to money matters, and the other had a habit of exercising his brain.”

One dad recommended, “Study hard so you can find a good company to work for.” The other recommended, “Study hard so you can find a good company to buy.”

One believed, “Our home is our largest investment and our greatest asset.” The other believed, “My house is a liability, and if your house is your largest investment, you’re in trouble.” Both dads paid their bills on time, yet one paid his bills first while the other paid his bills last.

One dad taught the author how to write an impressive resume so I could find a good job. The other taught him how to write strong business and financial plans so I could create jobs.

Even when the author’s “Rich Dad” 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, and poor is eternal.”

The author’s Rich Dad encouraged him to study to be rich, to understand how money works and to learn how to have it work for him. “I don’t work for money!” were words he would repeat over and over, “Money works for me!”

And when it was all said and done, there were only six main lessons, repeated over 30 years.

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Coming Next Time… LESSON ONE: THE RICH DON’T WORK FOR MONEY

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!

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Subject: A LESSON ON SPENDING

A simplification, I know, but it still holds…

Why the U.S. was downgraded:

• U.S. Tax revenue: $2,170,000,000,000
• Fed budget: $3,820,000,000,000
• New debt: $ 1,650,000,000,000
• National debt: $14,271,000,000,000
• Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

• Annual family income: $21,700
• Money the family spent: $38,200
• New debt on the credit card: $16,500
• Outstanding balance on the credit card: $142,710
• Total budget cuts: $385

So… if this were your family budget, what would you do?

We all enter the new year with hopes and dreams of a brighter future.  A new beginning.  This includes trying to improve ourselves, whether by losing a few pounds, training for a marathon even though we may have never run further than the mailbox or socking away a few thousand for a rainy day.  If you are like nearly half of the population, you have created at least one New Year’s Resolution.  But the majority of those resolutions are guaranteed to fail.  The high failure rate is probably why the other half have stopped creating resolutions.  But why is the failure rate so high?   It’s because what we do today are habits and behaviors that have been formed over time that we are very comfortable and familiar with.  Change is hard because it requires us to modify a behavior and form a new habit.

Let’s say I want to create a rainy day fund as an example New Year’s Resolution.  The way I currently spend and save is a comfortable behavior, because this is the way I’ve always done it.  I may go out to lunch every day or have a morning treat of a half caf caramel Machiatto.  If I wish to save more than I have in the past, one of two things are going to have to happen.  I either need to make more money or reduce my spending.   The easiest solution is to reduce spending.  But where?  I need everything.  I’ll die without my half caf caramel Machiatto in the morning. Well I don’t want you to die, so here are five very simple tips to help increase the odds of you achieving your New Year’s Resolution.

1. Make only one resolution at a time. Resolutions can be like our appetite.  As our eyes can be sometimes bigger than our stomachs, so too can our ambitions be bigger than our ability to see things through.  On New Year’s Eve, I feel like I can conquer the world.  New Year’s day…another story.   So, if you have created more than one resolution, take some time to think through these and pick the one that you feel the greatest desire in achieving.  This leads into our next tip.
2. You have to really want it. If you want success, than it has to start in the heart.  If the desire is only so-so or if you’re doing it because someone told you you should, than odds are you are already the majority of the way towards failure.
3. Break a resolution down into smaller goals. Don’t try to eat the whole elephant.  It’s guaranteed to come right back up on you.  Break your New Year’s goal down into smaller, achievable goals.  If your overall goal is to have an emergency savings of $5000 by the end of the year, break that $5000 down into 12 smaller goals of $416 per month.  $416 is a lot easier to swallow than $5000.
4. Develop an actionable plan to meet smaller goals. So, how are you going to save $416 per month?  Well if you break this down even further, you need to come up with $14 a day.  Start jotting down ideas on where you can reduce your spending by this much.  Making your own lunch instead of buying it might come out to a $7 savings.  Shopping around your car insurance might net you a couple of bucks a day.
5. Celebrate your wins! That’s right.  Each month you achieve your smaller goal, celebrate in some way.  It makes the journey a lot more fun and enjoyable.  If you miss your goal, don’t throw up your arms and give up.  With these smaller goals, it’s easier to look back and see why you missed the mark and make small adjustments to help you achieve the goal next month.

Copyright 5 Tips to Successful New Years Resolutions © 2012.  All rights reserved

The first of these is delayed gratification and putting a plan together on what to do with this new found fortune.  The temptation is to let them go ahead and spend it. However, here’s a way to still let them get excited about spending but learn some important lessons about savings at the same time.  I recommend breaking their money up into three buckets. This also gets them into a pay yourself first mentality.

Check out Bob’s interview with Murray Feldman on Fox 2 Detroit about teaching your kids how to handle the gift of money and you can  click here to read the story.

Turning Gifts Into Financial Literacy: MyFoxDETROIT.com