Raising Your Child’s Financial IQ
In this issue . . .
If you’ve been telling your children, “Go to college, get good grades and work at a large company until you retire” you may be dooming them to a paycheck to paycheck existence. The road to success will be very different for our children than it was for our parents. Our children cannot rely on life-time employment and retirement checks.
What is the answer? According to Robert Kiyosaki, the best selling author of “Rich Dad Poor Dad,” we must stop raising our children to think like employees and must instead teach them to think like business owners and investors. Their ability to understand the importance of creating passive income from investments, real estate, as well as investing for retirement is paramount to their future financial success. Skills that wealthy investors have always had are now essential to our children’s long-term financial health.
We caught up with Mr. Kiyosaki, as he was traveling through Australia on a speaking tour, and asked him to share with us, how parents can raise their child’s financial IQ and why we absolutely must!
Robert Kiyosaki is the author of “Rich Dad Poor Dad,” an international best seller that focuses on what the rich teach their kids about money that the poor and middle class do not. He is also the creator of one of our favorite board games, “CASHFLOW for Kids.” Although Robert’s business is real estate and developing small companies, his true love and passion is teaching. He is a highly acclaimed speaker on financial education and economic trends. His life-changing work has inspired audiences from 50 to 55,000 throughout the world.
Editor: Mr. Kiyosaki, often, parents tell their children that the key to a successful future is to “pay attention in school, get good grades, go to college and then get a good job in a large company.” That “good job” is supposed to provide them with the American dream–a big house filled with nice furniture and two cars in the driveway. Why do you think, that after following these rules and working hard to achieve the American dream, are millions of Americans living paycheck to paycheck?
Kiyosaki: The rules have changed today but many of us, as parents, keep giving the same advice to our children “Go to school, get good grades so you can get into a good college and get a good job with a good company that offers good benefits.” This advice was good during the Industrial Age but is no longer applicable for the Information Age.
Young people graduate from college and get good jobs. They begin to make money, credit cards arrive in mass and the spending begins. They meet other young people, date, fall in love and get married. Life is wonderful because now they have two incomes. As a successful couple they decide to buy a house and two cars, and have children. A pay raise comes in and they decide to buy a bigger house, because someone told them they can get a tax break from the interest. They realize they need to start saving for their children’s college education so they work harder to make even more money.
This happy couple is now trapped in the Rat Race for the rest of their working days. They work for the owners of their company, for the government paying taxes, and for the bank paying off a mortgage, car loan and credit cards. They learn nothing about money along the way. Then they advise their own children to “study hard, get good grades so they can find a good job.” The process repeats itself creating another hard-working generation.
The only way to get out of the “Rat Race” is through financial education. You must learn about money, accounting and investing.
Editor: What do the rich teach their children about money that is not taught in our schools?
Kiyosaki: In my book “Rich Dad Poor Dad,” I tell the story of growing up with two fathers. My real father was a highly educated man who died poor. My best friend’s father never finished the eighth grade but became one of the richest men in Hawaii. Both men were very influential in shaping my education and attitude about money. My poor dad would say, “I can’t afford it,” while my rich would say, “How can I afford it?” I chose to follow my rich dad’s advice about money.
In “Rich Dad Poor Dad” I share the six basic lessons about money that my rich dad taught me. These lessons are not taught in school:
1. The rich don’t work for money. “The poor and middle class work for money. The rich have money work for them,” he would say to me. The rich buy or create assets that work for them so they don’t have to.
2. Why teach financial literacy? You need to understand the difference between an asset and a liability. An asset puts money in your pocket and a liability takes money from your pocket. The rich understand the difference and buy assets, not liabilities.
3. Mind your own business. Many people confuse their profession with their business. To become financially secure people need to mind their own business. Your business revolves around your asset column, as opposed to your income column. The rich focus on their asset columns while the poor and middle class focus on their income columns.
4. The history of taxes and the power of corporations. The Tax Code of the United States provides many vehicles for people to save on their taxes. Most of these vehicles are available to anyone but it is the rich who usually look for them and use them because they have learned to “mind their own business.” For example an individual can utilize the tax advantages and protection provided by a corporation to get rich much faster than someone who is an employee or a small-business sole proprietor.
5. The rich invent money. Great opportunities are not seen with your eyes. They are seen with your mind. Most people never get wealthy simply because they are not trained financially to recognize opportunities right in front of them. The rich have learned to recognize opportunities as well as how to create them.
6. Work to learn–don’t work for money. To become successful you must learn how to manage cash flow, systems and people. Being in the Marines taught me leadership and working in sales for Xerox taught me how to sell and how to accept rejection. All of these skills were important for my success. Look for jobs that can help you develop the skills of managing cash flow, systems and people rather than just pay you well.
Editor: In your book, you tell the story of how a friend of yours turned his teenage son’s desire for a car into a great financial education. Will you share this with our readers?
Kiyosaki: A friend of mine had a sixteen-year-old son who desperately wanted a new car. Since all of his friends’ parents had bought their sons cars, he expected my friend to buy him one as well. After playing my game CASHFLOW my friend decided to use his son’s desire for a car as a learning opportunity. He gave his son $3000 but told him he could not use it directly for the car. He also gave him a subscription to the Wall Street Journal. He told his son that once he earned an additional $6,000 from investments he could use the $6,000 for the car and the $3,000 would go into his college fund. My friend said it was the best $3000 he ever spent. Not only had his son gained a new respect for the power of money, he also learned to spend money wisely instead of letting money burn holes in his pockets.
Editor: This is a creative way to teach teenagers about finance. Can you suggest a way to help younger children develop strong money skills?
Kiyosaki: There are three very important money skills that everyone should possess: how to earn money, how to manage it and how to invest
it. Our product, CASHFLOW for KIDS is a three part program for parents and teachers wanting to teach children these important skills. It includes the board game, an audio tape and book for parents titled, “How to Increase Your Child’s Financial IQ.” The board game teaches children the basics of all three money skills through role-playing. By playing the game, children will learn the vocabulary of money and the basics of financial statements.
Once they understand the concepts of income and expense and asset and liability they can start developing their own financial statements. On the audio tape we discuss having your children invoice you for their various chores in lieu of giving them an allowance, as well as having them keep track of their expenditures. It is through this process that they learn the value of their time and the difference between working hard for money and having money work hard for them. If your children learn to develop their own financial statements at an early age, they will be better prepared to succeed financially as adults.
Editor: As we enter the fast-changing and complex 21st century, why now, more than ever, must parents help their children develop financial intelligence?
Kiyosaki: In the Industrial Age the ticket for success was to go to school, get good grades, and find a safe secure job for life. You did not have to worry about your financial education because the company and the government would take care of you financially once your working days were over. The rules have changed. You can no longer rely on your employer or your government to take care of you.
Today, we are in the Information Age and more than job security we all need financial security. Unfortunately, our school system teaches us little about the subject of money. Our children will be required to learn much more than we ever did, and much more than schools are prepared to teach them. Cash flow management is an essential life skill and a skill that will require more and more sophistication as we move further into the Information Age.
“Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That The Poor and Middle Class Do Not” by Robert T. Kiyosaki and Sharon Lechter. Children start learning about money at a very early age by watching and listening to their parents. But how can we be a good financial role model for our children when we don’t have these skills ourselves? “Rich Dad Poor Dad” is written in simple terms, yet it can quickly teach you how to build a strong financial future for yourself and your children. This book is available for purchase at Amazon.com
CASHFLOW for Kids
Can parents and children learn about stocks, debt, liabilities, passive income and real estate, while having fun? Yes! “CASHFLOW for Kids” is the only educational board game on the market that helps kids and their parents learn more about getting out of the “rat race” and developing financial intelligence. The first player to create enough passive income from investments, business and real estate to cover their monthly expenses is the winner. This game also provides a great way to improve your child’s math skills. A great learning game for every family!
($59.95) Available for purchase at: https://secure.richdad.com/Default.asp
Here’s a great Web site for Young Investors!
The Young Investor Web Site
This award-winning site is the best resource on the Internet for teaching children about finance. With animation and lots of fun graphics, kids and their parents can explore the world of finance without reading dry finance books. One of the best sections on this site is the library. It is well organized and has easy-to-understand articles on investing and money, as well as a dictionary of financial terms. Kids and their parents will also discover what Albert Einstein considered the eighth wonder of the world–we aren’t telling–you have to visit the site to find out!