Introduction
Robert Kiyosaki wrote the book Rich Dad Poor Dad to depict the aspect of financial literacy based on his experience growing up with two fathers, one being his biological father and the other his father’s friend. On his account, Kiyaski stated that his biological father, “poor dad,” believed in working for money. An individual should attend school and obtain good grades to secure a better-paying job.
After obtaining a higher education qualification, the “poor dad” was a government employee with a high rank in the education sector. However, despite his position, he was having serious financial problems. The other father, whom he displayed as the “rich dad,” had a different opinion. According to the rich dad, money should work for people. The “rich dad” was a successful businessperson with several investments generating more income. Rich Dad Poor Dad is an essential book that gives proper insight into people’s perceptions of financial matters.
Key Themes of the Book
Rich Dad Poor Dad covers several themes related to money and wealth creation. The author uses simplified terms and practical explanations to enable readers to understand his viewpoint on money, investment, and risks. Some critical aspects Kiyosaki mentions include financial literacy, the educational system, the cash flow quadrant, assets versus liabilities, and the “rat race” (Kiyosaki & Lechter, 2001). Each concept is adequately explained with thorough illustrations to enable the audience to comprehend the book’s content.
Financial Literacy
Rich Dad Poor Dad mainly emphasizes the issue of financial literacy. The author argued that people should take financial education seriously to understand how money works. Without proper comprehension of finances, it might be challenging to manage and invest their resources effectively to generate proper income. Lack of skills and knowledge deprives most people of establishing wealth from their available resources (Kiyosaki & Lechter, 2001).
Based on the author’s perception, it is evident that a lack of financial knowledge hinders people from amassing the required wealth. Without a proper understanding of finances, individuals cannot undertake crucial projects and manage them accordingly to generate the required revenue. Therefore, financial literacy is essential for people to manage their resources effectively.
Educational System
In his book, Kiyosaki criticized the education system for being unable to teach students about finances. According to the author, schools do not give learners the relevant investment and money management skills necessary for achieving financial freedom. In other words, the learning institutions mainly focus on producing employees rather than employers.
To justify his reasoning, Kiyosaki stated that the education system has given more weight to traditional subjects encompassing literature, sciences, and mathematics, but has not allowed the trainees to engage in functional, practical skills such as entrepreneurship. In the current society, without a proper understanding of money, it can be challenging to manage and acquire wealth. Therefore, school curricula should incorporate financial programs to equip students with adequate knowledge. If the practice is implemented, it will be easier for governments to reduce the growing cases of unemployment across the globe since most graduates will have a different mentality geared towards job creation and self-dependency.
In addition, Kiyosaki posits that the education system has created and continues to promote the culture of working for a paycheck. The author argues that the approach deprives people of engaging in activities that can generate wealth (Kiyosaki & Lechter, 2001). It is essential to have different sources of income instead of relying on paychecks.
Being on a monthly salary is like slavery, in which an individual must remain active and forgo other fundamentals, such as spending time with family, to earn the income. Individuals should have relevant skills that will allow them to succeed even if they do not have a steady paycheck. Kiyosaki perceives employment as insecure, where people fear not having a constant income.
Cash Flow Quadrants
Furthermore, in his book Rich Dad Poor Dad, Kiyosaki effectively explains the concept of income using the cash flow quadrant. The author categorized four different ways that people generate income in the economy. The first segment entails the employees (E) actively trading their valuable time for money, either wages or salaries. Individuals in this section must go to work to earn income from the services they deliver to their employers based on their skills.
The second category is self-employed (S), which consists of people who usually work for themselves by offering relevant services to the market. Their skills and knowledge earn them income, and in most cases, they overwork or undertake duties for long hours. The quadrant’s first and second (left side) require constant involvement to generate income. The sections provide active income that stops immediately after the worker ceases to work. In addition, it consumes people’s time since individuals must trade their precious time to obtain money.
The third quadrant, the business owner (B), encompasses people who have started and run firms that generate significant income. Such individuals have employed many workers with different skills to offer their services. In this section, it is a must for the business owner to be present at the work for the operations to continue (Kiyosaki & Lechter, 2001). In other words, the persons create an active system that performs effectively without them being around. In this group, the people generate passive income, which implies that the income is obtained accordingly despite not being engaged.
The last quadrant is the investor (I); in this category, people engage in investment activities such as real estate and stocks. The focus of the investors is to generate passive income as well. The investments bring income to the persons in the I group, facilitating their wealth growth over time.
Based on Kiyosaki’s interpretation of the cash flow quadrant, people should focus on the right side of the quadrant. The B and I sections will ensure that an individual acquires wealth and remains independent (Kiyosaki & Lechter, 2001). However, the education system should be reformed, financial education should be incorporated, and traditional education should be replaced with practical aspects, including entrepreneurial programs, to reach this level. When such changes are made, people will gain the necessary skills to transform easily from the S and E quadrants to B and I and establish long-lasting wealth.
Assets Versus Liabilities
Robert Kiyosaki further explained the critical difference between assets and liabilities. According to the author, the latter takes money from people’s pockets while the former brings cash into their pockets. The education system has made most people understand the concept of assets and liabilities differently. For example, most people categorize their houses and personal cars as assets (Kiyosaki & Lechter, 2001). Such individuals fail to perceive that they are financing the items. In other words, they use their money to buy fuel for their cars, settle house electricity bills, and other basic expenditures.
Following the expenses incurred, Kiyosaki terms such assets as liabilities since they consume money. The viewpoint has duped many individuals into possessing liabilities in the name of assets. Therefore, instead of buying assets, people purchase liabilities that constantly take money away from them, leaving them financially unstable.
Rat Race
In addition, Kiyosaki stated that the system has facilitated the aspect of a “rat race.” The author describes the terminology as a situation where people are stuck in a cycle of working for money to settle their pending bills, making them rely on a paycheck. In society, the “rat race” is a common trend where most people, after graduating from school, seek employment, acquire loans, and buy houses and expensive cars to satisfy their living standards. In the end, such individuals remain with huge loans to finance, forcing them to stick to their routine employment.
However, Rich Dad, Poor Dad discourages the lifestyle and inspires individuals to concentrate on acquiring assets that generate income. Once a person has purchased significant properties, such as a condominium, it becomes easier to generate cash flow, which can be used to finance a lifestyle and avoid the issue of “rate race.”
Conclusion
The book Rich Dad Poor Dad depicts the critical aspects of financial literacy necessary for people to gain financial freedom. According to others, most individuals lack proper financial education to effectively manage and invest their resources. Furthermore, they described the concept of cash flow, income, and those who earn it. He used the four quadrants, E, S, B, and I, to indicate where such individuals belong. Lastly, Kiyosaki explained the difference between assets and liabilities to enable people to comprehend the two concepts. Based on the book, the author presents practical philosophies enabling people to break through to financial freedom.
Reference
Kiyosaki, R. T. (2001). Rich dad poor dad: What the rich teach their kids about money-that the poor and the middle class do not! Business Plus.