Chapter1 - Rich Dad Poor Dad

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Does school prepare children for the real world? “Study hard and get good grades and you will find a high-paying job with great benefits”, my parents used to say. Their goal in life was to provide a college education for my older sister and me, so that we would have the greatest chance for success in life .When i finally earned my diploma in 1976-graduating with honors ,and near the top of my class ,in accounting from Florida State University-my parents had realized their goal.it was the crowning achievement of their lives .In accordance with the “Master plan ”,I was hired by a “Big 8”accounting firm ,I looked forward to a long career and retirement at an early age.

 My husband, Michael, followed a similar path. We both came from hard-working families, of modest means but with strong work ethics. Michael also graduated with honors, but he did it twice; first as an engineer and then from law school. He was quickly recruited by a prestigious Washington D.C, law firm that specialized in patent law, and his future seemed bright, career path well defined and early retirement guaranteed.

 Although we have been successful in our careers, they have not turned out quite as we expected. We both have changed positions several times-for all the right reasons-but there are no pension plans vesting on our behalf. Our retirement funds are growing only through our individual contributions.

 Michael and I have a wonderful marriage with three great children. As I write this, two are in college and one is just beginning high school. We have spent a fortune making sure our children have received the best education available.

 One day in 1996, one of my children came home disillusioned with school. He was bored and tired of studying. “Why should I put time into studying subjects I will never use in real life? “He protested.

 Without thinking, I responded, “Because if you don’t get good grades, you won’t get into college.”

“Regardless of whether I go to college, “he replied, “I’m going to be rich.”

 “If you don’t graduate from a college, you won’t get a good job, “I responded with a tinge of panic and motherly concern. “And if you don’t have a good job, how do you plan to get rich?”

 My son smirked and slowly shook his head with milk boredom. We have had this talk many times before. He lowered his head and rolled his eyes. My words of motherly wisdom were falling on deaf ears once again.

 Though smart and strong-willed, he has always been a polite and respectful young man.

“Mom, “he began. It was my turn to be lectured. “Get with the times! Look around; the richest people didn’t get rich because of their educations. Look at Michael Jordan and Madonna. Even Bill Gates, who dropped out of Harvard, founded Microsoft; he is now the richest man in America and he’s still in his 30s.There is a baseball pitcher who makes more than $4 million a year even though he has been labeled ‘mentally challenged.’”

 There was a long silence between us. It was dawning on me that I was giving my son the same advice my parents had given me. The world around us has changed, but the advice hasn’t.

 Getting a good education and making good grades no longer ensures success, and nobody seems to have noticed, except our children.

“Mom,” he continued, “I don’t want to work as hard you and dad do. You make a lot of money, and we live in a huge house with lot 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 graduated .Look at doctors. They don’t make nearly as much as they used to .I know I can’t rely on social security or company pensions for retirement .I need new answers”

 He was right. He needed new answers, and so did I .My parents’ advice may have worked for people born before 1945, but it may be disastrous for those of us born into a rapidly changed world .No longer can I simply say to my children, “Go to school get good grades, and look for a safe, secure job.”

 I knew I had to look for new ways to guide my children’s education. As a mother as well as an accountant, I have been concerned by the lack of financial education our children receive in school. Many of today’s youth have credit cards before they leave high school, yet they never had a course in money or how to invest it, let alone understand how compound interest works on credit cards. Simply put, without financial literacy and the knowledge of how money works, they are not prepared to face the world that awaits them, a word in which spending is emphasized over savings.

 When my oldest son became hopelessly in debt with his credit cards as a freshman in college, I not only helped him destroy the credit cards, but I also went in search of a program that would help me educate my children on financial matters.

 One day last year, my husband called me from his office. “I have someone I think you should meet, “he said. “His name is Robert Kiyosaki. He’s a business man and investor, and he is here applying for a patent on an educational product. I think it’s what you have been looking for.”

Just what have I was looking for

My husband, Mike, was so impressed with CASHFLOW, the new educational product that Robert Kiyosaki was developing, that he arrange for both of us to participate in a test of the prototype. Because it was an educational game, I also asked my 19-year old daughter, who was a freshman at a local university, if she would like to take part, and she agreed.

 About fifteen people, broken into three groups, participated in the test.

Mike was right. It was the educational product I had been looking for. But it had a twist: It looked like a colorful monopoly board with a giant well-dressed rat in the middle. Unlike monopoly, however there were two tracks: one inside and one outside. The object of the game was to get out of the inside track-what Robert called the “Rat Race”-and reach the outer track ,or the “Fast Track”. As Robert put it, the Fast Track simulates how rich people play in real life.

 Robert then defined the “Rat Race” for us.

“If you look at the life of the average-educated, hardworking person, there is a similar path. The child is born and goes to school. The proud parents are excited because the child excels, get fair to good grades; and is accepted into a college. The child graduates, maybe goes on to graduate school and then does exactly as programmed: looks for a safe, secure job or career. The child finds that job, maybe as a doctor or a lawyer, or joins the Army or works for the government. Generally, the child begins to make money, credit cards start to arrive in mass, and the shopping begins, if it already hasn’t.

 “Having money to burn, the child goes to places where other young people just like them hang out, and they meet people, they date, and sometimes they get married. Life is wonderful now, because today, both men and women work. Two incomes are bliss. They feel successful, their future is bright, and they decide to buy a house, car a television, take vacations and have children. The happy bundle arrives. The demand for cash is enormous. The happy couple decides that their careers are vitally important and begin to work harder, seeking promotion raises. The raises come, and so do another child and the need for a bigger house. They work harder; become better employees, even more dedicated. They go back to school to get more specialized skills so that can earn more money. Maybe they take a second job. Their income goes up, but so does the tax bracket they’re in and the real estate taxes on their new large home, and their social security taxes and all the other taxes. They get their large paycheck and wonder where all the money went. They buy some mutual funds and buy groceries with their credit card. The children reach 5 or 6 years of age, and the need to save for college increase as well as the need to save for their retirement.

 “That happy couple, born 35 years ago, is now trapped in the rat race for the working days”. They work for the owners of their company, for the government paying taxes and for the bank paying off a mortgage and credit cards.

 “Then, they advise their own children to ‘study hard ‘get good grades, and find a good job or career. ‘They learn nothing about money, except from those who profit from their naiveté and work hard all their lives. The process repeat into another hard-working generation. This is the “Rat Race”.

 The only way to get out of the “Rat Race “is to prove your proficiency at both accounting and investing ,arguably two of the most difficult subjects to master. As a trained CPA who once worked for Big 8 accounting firm, I was surprised that Robert had made the learning of these well-disguised that while we were diligently working to get out of the “Rat Race “we quickly forgot we were learning.

 Soon a product test turned into a fun afternoon with my daughter, talking about things we had never discussed before. As an accountant, playing a game that required an Income Statement and Balance Sheet was easy. So I had the time to help my daughter and the other player at my table with concepts they did not understand. I was the first person and the only person in the entire test group-to get out of the “Rat Race “that day. I was out within 50 minutes although the game went on for nearly three hours.

At my table was a banker, a business owner and a computer programmer. What greatly disturbs me was how little people knew about either accounting or investing, subjects so important in their life. I wonder how they manage their own financial affairs in real life. I could understand why my 19year old daughter would not understand, but this were grown adult at least twice her age.

After I was out of “Rat Race”, for the next two hours I watched my daughter and this educated, affluent adult roll the dice and move their markers. Although I was glad they were all learning so much, I was disturbed by how much the adult did not know about the basics and simple accounting and investing. They had difficulty gasping the relationship between their Income statement and their Balance Sheet. As they bought and sold asset, they had trouble remembering that each transaction could impact their monthly cash flow. I taught how many millions of people are out there in the real world struggling financially only because they have never been taught this subject?

Thank goodness they are having fun and they are distracted by the desire to win the game, I said to myself. After Robert ended the contest they allowed us 15mins to discuss and critique CASH FLOW among ourselves.

The business owner at my table was not happy. He did not like the game. “I don’t need to know this, He said.” I hire Accountants, Bankers, and Attorneys to tell me about this stuff.

Have you ever notice that their lot of accountant who are not rich? Robert replied and Bankers and Attorneys and Stock Brokers and we Estate Brokers.