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Lessons From… Rich Dad Poor Dad (Summary #2)
About The “Lessons From” Series
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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Kids Learn Business Skills by Preparing a Dinner Menu
written by: Coach Funk, CFP® at www.SavingsCoach.com
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.
Lessons From… Rich Dad Poor Dad (Summary #1)
About The “Lessons From” Series
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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A Lesson On Spending
I received this in an email and thought it provided a great, easy way to picture our national debt by comparing it to a household budget.
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?
Turn An Old Smart Phone into a Free Gaming Device for Kids
I’m giving my 6 year old a cell phone for Christmas. Whoa! Hold on. Let me explain. My daughter is really 6, and it’s a real cell phone, but it’s not going to have any cell phone service. I’m “repurposing” a gently used Android cell phone to provide a FREE and pretty darn sweet handheld gaming device for her for Christmas.
She loves playing games on my cell phone (another Android device) and is asking us for “something like her brothers have that can play lots and lots of different games”. Nintendo DS, I’m sorry, but she’s looking for something more.
She would love an iTouch, but at $170+ that’s way out of 
Santa’s price range, and it’s way more than she needs at 6 years old. I’ve heard the LeapPad Explorer is popular this Christmas, but at $130 that’s also way too pricey and, knowing my daughter, she would tire of the included games and I really don’t want to have to buy more.
I found a “just right” option my used LG Optimus S android cell phone. I can connect it to our wifi at home and use it without a cell phone connection or bill. It has access to the Android Market and it can run most the games available there. All of the games she wants to play are FREE (as in free air). I don’t need to worry about her becoming bored with it because there are hundreds of new games available on the Android market each month.
Anyone can pick up a used LG Optimus for less than $40 on eBay (or select from a wide assortment of other used android phones). The games are free. New games are available all the time. You can work in a bunch of educational “games” as well which are also free.
What’s not to love?
Update: as a reader pointed out, old cell phones still have the ability to dial out to 911 even without service. Kids do have the ability to dial 911 from any phone in the house today, and that’s a good thing, but it will be important to emphasize that this is a real cell phone and can really call 911 just like any other “real” phone. There are apps in the Android Market like Call Blocker Gold (paid) that have the ability to disable outgoing calls, but I have not personally tried any of them yet.
For those not familiar with connecting a cell phone that doesn’t have service to wifi, here’s how to do it with an android phone:
- From the home screen, hit the Menu button
- Open Settings, Wireless & Networks
- Check the box to turn on Wifi. You will be prompted for your wifi password if you have one set (which you should!)
- Update: you can also turn on Airplane mode from here before you turn on wifi. This will keep the phone from trying to connect to the cell phone network.
Knowing How to Write a Check Is… Still Important!
Today’s kids will be tomorrow’s adults and we keep on hearing that so many young adults don’t have a clue how to write a check. We’re here to help!
For the next goal your child achieves in FamilyMint, rather than whipping out the debit or credit card at the store, take your checkbook with you and make it a learning opportunity. You could print this tutorial out too to let them follow along visually and review later.
Step 1 – Start with the Date
Write today’s date in the upper right corner of the check.
Step 2 – Payee
The payee is who you are paying. In other words, it’s who you are giving your money to. Write the company or person’s name on the line next to “Pay to the Order of”. If you don’t know exactly what to write in here, ask the person you are paying. Don’t sign the check without writing this in first! If you leave this blank, anyone can write in their own name in there and easily steal from you.
Step 3 – Amount
This is when your hands may start to get sweaty! You need to write in the amount of your hard-earned cash that you are handing over to the person receiving the check. That really is the best way to think about it… writing a check is the same as giving them real cash from your real checking account.
First write in the amount you are paying in the box next to the Payee. Start far over to the left so the person receiving the check, if they’re untrustworthy, can’t write in a “1” and change the check from $87.42 to $187.42!
Then, on the line below Payee, write in amount again, but this time using words. For example, “Eight-Seven and 42/100”. This is read as Eighty-Seven dollars and 42 cents. Most checks will already have “DOLLARS” preprinted on them so you don’t need to write that again. Also, draw a line after the 42/100 all the way to the right so again nobody could write anything extra in there.
Step 4 – Signature
The last step is to sign the check. Your signature needs to match the one your financial institution has on file, so no letting kids help with this step!
Step 5 – Enter a Memo (Optional)
This step is not required, but if you’d like to have a reminder of why you wrote the check, write it next to “Memo” or “For” toward the bottom of the check. Note you’ll only be able to see this memo later on if you’re able to access images of your canceled checks from your financial institution.
Step 6 – Update Your Check Register
Hey, wasn’t Step 4 was the last required step? No way! You need to update your check register so you can track that the money is now gone… and you don’t try to spend it again. If you don’t do this, as well as your overall balance, you could end up with fees from your financial institution for a bounced check (which could be as high as $25 or $30) as well as insufficient fund fees from the merchant you were writing a check to. This is costly!
Here’s an example check register entry for the check we just wrote at the grocery store:
That’s it! ! It’s actually kind of soothing to whip out the old pen to write a check and give my texting thumbs a rest.
Extra Credit – Those Funny Numbers at the Bottom of the Check
We covered almost every part of a check. But what about those numbers at the bottom? These are your routing transit number, which identifies your financial institution, your account number, and your check number. There may be other numbers at the bottom including the amount of the check if the check is created electronically, but this covers the basics.
Letting Kids Participate in Family Money
By Jeff
We had a mom write in with some ideas that she uses with her own kids at home. We thought they were great, so we wanted to share them with you.
This mom said she wanted to find ways to give her kids more visibility and involvement in everyday decisions she was making as a mom about money and budgeting. Here are the ideas she came up with and put into practice:
- Let them open the bills. She said their shocked faces were priceless as they absorbed how much they had to spend each month on their mortgage payment, utilities, and other bills.
- Let them help pick out groceries, but make it a game in that they can only buy things that are on sale. Whoever finds the biggest discount on things they need to buy wins.
- Let them hand over the cash at a store or a restaurant counter. There is a real feeling of loss when they have to hand over cash in their hand to someone else. It helps makes spending “real” vs. just swiping a credit card.
- Put them in charge of some of their own spending. Give them a budget for eating out and, even if they go out as a family, they must “pay” for it themselves out of this budget. She said she set up an “Eating Out” goal in FamilyMint that she makes a deposit into each month, and the kids withdraw from each time they go out.
We think these are all great ideas, and love to hear about ways you are creating teachable moments to make your kids money-smart on a daily basis.
Copyright Letting Kids Participate in Family Money © 2011. All rights reserved
“Deficit” vs. “Debt”
By Bob Masterson
With the national debt currently at $14.9 trillion, we hear a lot of talk about reducing our national deficit. My teen posed a question while watching a recent debate as to what the difference was between debt and deficit. “That is an excellent question my son,” said I, knowing that many politicians bank on most people not knowing the answer or are not paying close enough attention to how politicians spin it.
So, let’s put it into terms of a household. Let’s say our income is $5000 a month after taxes. Now we subtract all of our household and living expenses such as mortgage, insurance, utilities, food, etc. If we spend less than our income we have a surplus. Yea!!! On the other hand, if we spend more than our income, we have a deficit. Boo!!! If we have a deficit, we must borrow money in order to cover the difference, which is called debt. We have to pay interest on this debt until it is paid back in full.
If a deficit happens every month, we are living beyond our means and are forced to borrow more money and incur more interest on the ever growing debt. If we do nothing to change our habits, then over time, the interest on the debt becomes larger than any other item within our family budget. Further, if no one is willing to loan us money to cover the interest payments, we face the possibility of bankruptcy. Not a pretty picture is it?
Now that we understand debt vs. deficit at a family level, let’s return to my son’s original question about our national debt at $14.9 trillion. The government is no different than a household. The government has income it receives through taxes and fees. Expenses are subtracted and the government either has a surplus or a deficit. What do you think the government usually has? If you answered deficit you are correct! Believe it or not, the U.S. government has run a deficit in all but 5 years since 1969[i]. Not fiscally sound practices by any household standards.
Each year the interest on this growing debt gets larger and larger cutting into the government’s budget. So when you hear politicians spouting about how they are going to reduce the deficit, this is just a meaningless sound bite hoping to confuse the voter. Because, as we just learned, any deficit greater than zero requires us to continue borrowing and therefore does not reduce our debt.
By the way, your personal share of this national debt currently stands at over $47,000. That’s $47,000 that you, your spouse, and each of your kids will have to pay to our government in order to help them pay off the debt they have incurred on our behalf.
Here’s an interesting video entitled “Brother, Can You Spare A Trillion?: Government Gone Wild!” to help put this $14.9 trillion national debt into perspective.
[i] http://usgovinfo.about.com/od/federalbudgetprocess/a/Budget-Deficit-History.htm
Copyright Deficit vs. Debt © 2011. All rights reserved
What Teens Really Know About Money
By Bob Masterson
How financially savvy are our teens when it comes to money? Charles Schwab recently released their 2011 Teens & Money Survey Findings and I was quite surprised by the results, especially when comparing them to 2007 results. This annual survey polls more than 1,000 teens 16 to 18 years old and provides insights into their money attitudes, behaviors and expectations.
When it comes to being savvy about money, the line between what teens think and reality is as wide as the Grand Canyon. Most teens surveyed believe they are financially savvy. But when asked about specifics such as establishing good credit, balancing a check book or what a credit score is, the majority of teens were in the dark. In fact there is a notable decline in teen’s knowledge of money management skills between 2007 and 2011, especially around how to balance a checkbook or check the accuracy of a bank statement. Of course a key contributor to this decline could be that far fewer teens have saving or checking accounts than they did in 2007.
On the positive side, the recession has had a significant impact on teens especially around the importance of saving and 73% of teens feel it’s important to have an emergency savings. Teens also reported a shift in their mindset with 64% saying they are more grateful for what they have and listen to this, 56% say they have a greater appreciation for how hard their parents work. Another positive from this recession is it has produced more discussions within the family about money and money management.
80% of teens surveyed, up from 53% in 2007, said learning about money management, including budgeting, saving and investing is one of their top priorities with 82% of the teens saying they primarily learn about money management from their parents. Teens stated they would like their parents to talk with them more about investing, establishing good credit, career aspirations and how to budget their money.
So what does this tell us? Most importantly we need to narrow the financial literacy gap between where teens think they are and where they actually are. On the plus side teens have expressed the desire to learn about money management, which is the most important step in moving forward.
Education begins in the home and it’s never too early to begin. Kids are forming their opinions and behaviors around money at a very early age by watching us parents in how we handle and manage our money. This was the primary reason FamilyMint was developed, to act as the modern replacement for the piggy bank, where kids can learn about money management and goal setting in a safe, interactive environment, while emphasizing the importance of saving, setting and achieving goals.
Copyright What Teens Really Know About Money © 2011. All rights reserved