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Rich Dad Radio Show: In-Your-Face Advice on Investing, Personal Finance, & Starting a Business
The Financial System Most People Were Never Meant to Understand
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This episode is brought to you by Progressive Insurance. Do you ever find yourself playing the budgeting game? Well, with the name your price tool from Progressive, you can find options that fit your budget and potentially lower your bills. Try it@progressive.com Progressive Casualty Insurance Company and affiliates Price and coverage match limited by state law not available in all states. The system turned you into a money making machine for someone else. You became the leverage for someone else's wealth. They gave you a diploma and handed you to an employer. Here's what they never told you. Employees work for entrepreneurs. Now ask yourself one question. Which one did school prepare your kids to be? Today on the Rich Dad Radio Show, I'm going to show you what the rich teach their kids so you can do the same thing. This is the Rich Dad Radio show. The good news and bad news about money. Here's Robert Kiyosaki. Welcome to the Rich dad radio show. The good and bad about money. This is Robert Kiyosaki and today is just you and me and we're talking about what the rich are teaching their kids about money. Now, a friend of mine called me not long ago. He was proud, really proud. His son had just graduated near the top of his class. Straight A's, honors scholarships. He said, robert, my son did everything right. I said, good. Then I asked him one question. Is he financially free? Does he have a plan? Silence. Then, no. But he just started. I've heard that answer my entire life. And I've watched what happens next. Every single time a few years passed, that same young man called me himself. Different tone. Robert, I don't get it. He said, I did everything I was supposed to do. School, good grades, good job. But I feel stuck. Every time I make more money, my expenses go up. I'm working harder, but I'm not getting ahead. I asked him one simple question. What did school teach you about money? Silence. Then he laughed. Not because it was funny, because it wasn't. That's the problem. I said, you did everything right. In a system that never taught you how money actually works. People hear that and they get uncomfortable. They say, robert, of course we have a money problem. Everything costs more. People are drowning in debt. Wages aren't keeping up. I understand all of that, but that is not the root of the problem. The root of the problem is that most people were never taught how money actually works. We are not in a financial crisis. We are in an educational crisis. Think about it. A study tested over a thousand adults on basic financial principles. 69% scored below a C. Simple questions about Inflation, about how money moves. Nearly 7 out of 10 adults failing. And you wonder why people are struggling. It's not because they don't work hard. It's because they were never taught the game they're playing. And here's the part that nobody wants to say out loud. If you're doing everything right and it's still not working, maybe the system is. From the time you're a child, you spend years inside a school. Math, history, science, literature. You learn how to follow instructions. You learn how to take tests. You learn how to earn a grade. But here's what I want you to think about. Where in that entire process do you learn about money? Where do you learn how taxes work? Where do you learn how debt actually functions? Where do you learn the difference between an asset and a liability? You don't. Instead, you're handed a plan that sounds responsible. Go to school so you can get a good job. That's the mission. Not financial freedom, not ownership, not building anything. A job. Now, there's nothing wrong with a job, but if a job is your entire financial plan, you're going to struggle, no matter how smart you are. And I've watched this my entire life. Doctors earning $300,000 a year buried in debt. Lawyers with beautiful offices, one missed paycheck from disaster. Executives with high salaries and no real assets. Why? Because no one ever taught them what happens after the paycheck arrives. Money comes in. Taxes take a chunk, lifestyle expands, money goes out. And what's left? Usually not much. That is not a money problem. That is a knowledge problem. Most people learn about money from their parents. But what can a parent teach about money if they were never taught themselves? They say what they were told. Study hard, get a good job, save your money. That sounds responsible. But here's what they never say. They never say what the rich are teaching their kids. And that difference, that one missing conversation, changes everything. And now a quick message from my sponsor. You're going to want to hear this one. Thank you for listening to the Rich dad radio Show. As you know, I've had my friend Jim Rickards on my show a bunch of times. Now Jim has a new message to share. 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Most people assume the school system just forgot to teach money. Like it was an oversight and an honest mistake. It wasn't. I spent years asking why schools leave out financial education. Then I started meeting people who had answers. John Taylor Gata was named New York City Teacher of the Year three times. He also won New York State Teacher of the year. In 1991, he quit. He wrote in the Wall Street Journal, I can't teach this way anymore. If you hear of a job where I don't have to hurt kids to to make a living, let me know. He told me something I've never forgotten. Our school system is based on a Prussian model. A system designed to produce good employees, good soldiers, people who follow orders, people who wait to be told what to do, including what to do with their money. Gata said to me, the school system was not designed to teach children to think for themselves. It was designed to teach children to obey. Compliant, obedient people who work for the rich, not people who become rich. In 1903, John D. Rockefeller created the General Education Board. A steady supply of workers always in financial need, always needing a job, always needing security. Now, you may not believe any of this was intentional. That's fine. But what you cannot deny is that our schools receive a failing grade when it comes to money. Whether it was planned or not, the result is the same. Millions of highly educated people, financially insecure, dependent on a paycheck, waiting for someone else to tell them what to do with their money. That's not an accident. That's a pattern. So if schools won't teach it, who will? Most people say the same thing. Parents. But here's a problem nobody wants to say out loud. Most parents were never taught about money either. They went through the same system. Good grades, college, job security. So they passed down what they were given. Rules without context. Don't invest. It's too risky. Debt is Bad. Stay out of debt. Just save your money. Be grateful you have a job. None of those statements sound wrong on the surface. But without context, they don't educate, they limit. They pass down financial fear. Fear of losing money, fear of taking risk, fear of thinking differently. And here's where it gets personal. My poor dad, the highly educated man, often said, I can't afford it. Every time money got tight, the that was the answer. I can't afford it. My rich dad wouldn't allow those words in his house. He said, don't say, I can't afford it. Ask how can I afford it. One is a statement, the other is a question. One puts your brain to sleep, the other puts it to work. That difference alone changed the way I think about money. Because the words you say about money become the beliefs you hold about money. And the beliefs you hold become the decisions you make. And the decisions you make determine the life you live. Most parents don't pass down wealth. They pass down a way of thinking about money. And right now, for most families, that thinking is keeping them stuck. I've said this many times. The number one problem in most families is not money. It's the conversation about money that never happens. A child grows up in a home where money is either hidden or emotional or avoided. They see their parents argue about bills. They hear, we can't afford that so many times it becomes a reflex. They never see an investment made. They never hear a conversation about building something. They never learn that debt can be a tool, not just a trap. So they grow up and they repeat the pattern. They chase income, they avoid risk. They save money not knowing that saving is losing. When inflation is eating away at every dollar, they put aside and they wonder why nothing changes. Generation after generation, same mistakes, same fears, different names. My rich dad called it this. He said the fear of not having enough money ran through poor families like an electric current. I watched that in my own home growing up. The fear became real. It became the family's reality. And that's the dangerous part. The thing most parents don't realize is this. You are teaching your child about money right now. Not with a lesson, not with a lecture, with what they see, with what they hear, with what you do and don't do every single day. The question is, what are they learning? Because the rich made a different decision. And that decision is what we're going to talk about after the break.
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Welcome back. Before the break, we're talking about what most parents pass down, financial fear, financial habits, a way of thinking about money that keeps the pattern going generation after generation. Now, I want to tell you what the rich do differently because it is not complicated, but it changes everything. My rich dad started teaching his son and me about money when I was nine years old. Nine. Not in college, not at my first job. Nine years old. And the first lesson wasn't complicated. He drew two simple pictures. He said, an asset is something that puts money in your pocket. He drew an arrow going in. Then he drew the second picture. A liability is something that takes money out of your pocket. Arrow going out. That's it. Two arrows. Most people never learn this, and people get angry when I say this, but most people spend their entire lives buying liabilities they think are assets. Their house, their car, the furniture, the boat, all of it going on the balance sheet as assets. But here's a question my rich dad taught me to ask. Does it put money in your pocket every month or does it take money out your house? Does it put money in your pocket? Mortgage payment, property taxes, insurance, repairs, maintenance, money going out. That is a liability. The word does not change because you love the house. It doesn't change because your realtor told you it was an investment. My rich dad said it simply. Your poor dad struggles financially because he calls liabilities assets. He gets a pay raise. He pays more in taxes. His accountant says, buy a bigger house, you'll get a tax break on the mortgage interest. So he buys a bigger liability. Cash flows out even faster. And he keeps calling it an asset. That is the trap. Most people's Financial problems begin with not knowing the difference between an asset and a liability. They spend their lives buying liabilities they think are assets. And because that money is flowing out of their pockets, they never have enough left to buy the real thing. My rich dad would say, one look at a person's financial statement and I can tell if they are rich, poor or middle class. He showed me three pictures. Three patterns, same lesson, three different lives. The first pattern is the poor person. Income comes in from a job, goes straight out through expenses. Nothing is left. Rich dad said a poor person is someone who spends everything they make. It has nothing to do with how much they earn. I know many people who make a lot of money. The problem is they spend it as fast as it comes in. That is how you can be a poor person who makes a lot of money. That hit me hard the first time I heard it because I'd seen it. You've probably seen it too. The second pattern is the middle class. Income comes in from a job. But before the money even gets to expenses, there are liabilities. Mortgage, car payments, credit cards, long term debt. And rich dad said the problem with these people is that when they get a few extra dollars, they spend it to go further into debt. They get a bonus, a raise, and they use it as a down payment on a bigger car or a bigger house. More liability, more cash flowing out. And they wonder why they can never afford to quit their job. Because they can't. Their liabilities won't let them. Now the third pattern, the rich person income does not come from a job. Income comes from the asset column. Businesses, real estate investments, assets generating cash flow. Whether the rich person is working or not, that is the difference. Rich dad said it clearly. The rich acquire assets, the poor and middle class acquire liabilities. Most people were never shown these three pictures. School never drew them. Most parents never drew them. The rich draw them at age nine. That's the head start. Here is the most important thing my rich dad ever taught me about money. He called it the point of choice. He said, at the point money hits your hands, you have the power to determine your financial future. Every dollar, every single time. The moment you receive money, you make a choice. Most people don't realize they're making one. They just spend or they just save. And they think those are the only two options. But my rich dad showed me a third option. He said if you just spend it, you choose to be poor. If you take on long term debt you must personally repay, you choose the pattern of the middle class. And if acquiring assets is your first priority. You choose the cash flow pattern of the rich. Three choices. Every time money touches your hands, and here's the part most people miss. It is not about how much you make. I have heard people say for decades, I'll never be rich because I don't make enough money. My rich dad disagreed. He. He said it's not how much money a person makes that makes them rich or poor. It's what a person does with that money. Think about it. A person earning minimum wage who acquires an asset is ahead of an executive who spends everything he earns. The pattern is what matters, not the paycheck. Now, I want you to think about this, because most people who are financially stuck are not stuck because they don't earn enough. They're stuck because every time money hits their hands, they choose the wrong pattern. Not on purpose, because nobody ever showed them there was another choice. The rich show their kids that choice at 9 years old. That is what changes everything. And that is what we're going to talk about after the break. Okay, we are back before the break. I told you about the point of choice. Every time money hits your hands, you decide. Spend it, borrow on it, or acquire an asset. Most people never knew there was a third option. The rich teach their kids that option at nine years old. And it creates something most people never get. An unfair advantage. My rich dad wrote something down for me once. Two lists. He called them priorities. The poor and middle class list look like. First priority, employment security. Second, consumption. For comfort. Third, savings. Fourth, investing. If anything is left over, that's the list most people follow. They don't even know they're following it. Then he showed me the rich person's list. First priority, assets from the investment portfolio. Second, professional satisfaction. Third, savings. Fourth, consumption for comfort. He looked at me and said, the rich are not necessarily smarter. They just have different priorities. That's it. That's the whole secret. It's not intelligence. It's not connections. It's not luck. It's priority. The poor and middle class earn money and immediately start spending it. The rich earn money and immediately start acquiring assets. One group has income flowing in and out. The other group has income flowing in and then into assets that generate more income. That's what I mean by the unfair advantage. It's not about working harder. It's not about being smarter. It's about which list you you are following. And if you weren't taught the second list, you didn't even know you had a choice. Most of the 70% of American adults who Failed that basic financial test they were following. List number one. Hard working, smart, educated, but running the wrong program. And here's why. It's unfair. Rich children learn. List number two. At home. Poor middle class children never see it. That's the advantage. Not money, not talent. A different set of priorities taught early and repeated for life. My rich dad said one thing to me as a kid that I've never stopped thinking about. Don't work for money. Learn how to make money work for you. Most people never flip that sentence. They spend their entire lives on one side of it. Work harder, earn more, spend more, then work harder. Again, it's the rat race, and it doesn't matter what you earn. I've met people earning $50,000 in the rat race. I've met people earning $500,000 still in the rat race. The number changes, the pattern doesn't. Because here's what most people don't understand. Earned income. The money you get from a job, is the most heavily taxed income there is. The government taxes the income you work hard for more than the income your money works hard for. Think about that. You bust yourself and you get taxed the hardest. Your money sits in an asset and it gets taxed less. The rich know this. Their kids know this. Your banker knows this. But nobody tells you this in school. So most people keep trading time for money, hours for dollars, every single day. And the rich are converting that same earned income into assets, into passive income, into cash flow that arise whether they work or not. Kim and I reached a point where we didn't have to work anymore. Not because we were lucky, because we kept asking the right question. Not how do I earn more, but how do I make what I earn more work harder than I do? That question is worth everything. So where does that leave you? Here's what I want you to hear. You don't need to be perfect. You don't need to know everything about money to start. You just need to start. My rich dad often said, if you don't teach your children about money, there are many other people who will. And he was right. If you don't teach them, the world will. And the world is a very expensive teacher. It teaches through debt, through missed opportunities, through decades of figuring it out the hard way. That was a young man I told you about at the beginning of this episode. The one whose dad was so proud. Straight A's, good job, doing everything right. He learned about money the way most people do. The hard way. Years of working harder, going nowhere, years of expanding his lifestyle to match his income. Years of calling liabilities assets. Until one day he called me, Robert. What am I missing? And the answer was simple. Not easy, but simple. He was never shown the two lists. He was never taught the point of choice. He was never told that his house was a liability. He was never shown what assets look like or how they flow. He was running a program he inherited, and nobody had ever interrupted it. That's what financial education does. It interrupts the program. It breaks the cycle. Not in a classroom, at home. In the conversations most families never have, the rich have those conversations. They've been having them for generations. That's not an accident. That's a decision. And the decision is available to you. I want to leave you with this. The young man eventually changed. Not overnight, not all at once, but he changed. He started asking different questions. He stopped asking, how do I earn more? He started asking, where does the money go? He stopped calling liabilities assets. He started building a real asset column. Small at first, then bigger. And something happened that doesn't happen for most people. He stopped feeling stuck. Not because his income exploded, because his thinking changed. And once that shift happens, you cannot put it back. You see the three patterns. You see the point of choice. You see the two lists, and you cannot unsee any of it. That is what the rich give their children. Not money, not connections, not a head start in the traditional sense. A different way of seeing. And once you see it, you're already playing a different game. That's the difference. Thank you for your time. Thank you for caring about your future. Thank you for understanding that you are the only one who cares about taking care of you. Take care, Sam.
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This podcast is a presentation of Rich Dad Media Network.
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This episode is brought to you by Progressive Insurance. Do you ever find yourself playing the budgeting game? Well, with the name your price tool from Progressive, you can find options that fit your budget and potentially lower your bills. Try it@progressive.com Progressive Casualty Insurance Company and affiliates. Price and coverage match limited by state law. Not available in all states.