Rich Dad Poor Dad — Two Ways of Thinking about Money

2024-04-28

Few personal-finance books have titles as recognisable as Rich Dad Poor Dad. Robert Kiyosaki’s story, originally written with Sharon Lechter, reached readers well beyond the audience that usually picks up a book about money.

Decades after publication, it remains worth reading for the questions it raises about what income does and how people learn to handle it.

A Title That Does Half the Work

Put “rich dad” next to “poor dad” and the comparison is already under way. The title tells you what kind of story to expect before you open the book.

The original appeared in 1997 under the title Rich Dad Poor Dad. The Korean translation kept the same pairing.

The first Korean edition arrived in 2000, after the book found a large American audience, and made an impression of its own.

Two Fathers, Two Ideas about Money

This is a personal-finance book written as a comparison. Kiyosaki presents his own father as a man who prized education and his friend’s father as a man whose practical understanding of money made him wealthy.

The two perspectives give readers a way into the argument without requiring a background in economics or business.

In Kiyosaki’s telling, his own father was formally educated but struggled financially. The other father had less schooling and knew how to make money work to his advantage.

The lessons come in episodes from the author’s childhood. We see the boy encounter an idea and then try to act on it.

An early episode has him work at one of the rich father’s businesses. He begins to think about ways of earning beyond an hourly wage, and eventually tries a small business of his own.

What Kiyosaki Learns from His Rich Dad

The adult Kiyosaki says he kept applying the ideas he learned from the wealthy father figure. Those ideas became the basis of the book.

The comparison often turns on what a person says when they cannot afford something. One father accepts that the money is unavailable. The other turns it into a question about how he could afford it.

  • The book contrasts earning wages with owning things that can generate income.
  • It contrasts formal learning with the practical knowledge of how money moves.

What He Means by Financial Literacy

Kiyosaki starts with assets and liabilities. His childhood teacher explains them in terms of cash flow, using a definition narrower than the one an accountant would use.

  • Asset: something that puts money in your pocket.
  • Liability: something that takes money out of your pocket.

The book asks readers to look at the cash that goes into owning a home: mortgage payments, interest and other costs. In the book’s framework, a primary residence can act as a drain on cash while you live in it.

A rental that produces income, or a sale at a gain, is a different case. Whether a house puts money in your pocket depends on how it is used and what it costs to own.

Seven Things the Book Treats as Assets

The book gives seven examples of what Kiyosaki means by income-producing or marketable assets.

  1. A business that can run without your day-to-day presence
  2. Shares
  3. Bonds
  4. Income-producing property
  5. Notes and other debt instruments
  6. Royalties from music, writing or other intellectual property
  7. Other things that have market value

The Cashflow Quadrant

A related idea, developed in Kiyosaki’s later Cashflow Quadrant, is to distinguish different sources of income.

The model groups earned income on one side and income from businesses or investing on the other. Kiyosaki advocates building assets that can generate income beyond the work you do directly.

  • E — Employee
  • S — Self-employed
  • B — Business owner
  • I — Investor

In the model, an employee and a self-employed person are paid for work they do themselves. A business owner can build a system that functions in their absence, while an investor commits capital in pursuit of a return.

Kiyosaki treats the point where business or investment income covers living expenses as a step toward financial independence.

Management Skills the Author Emphasises

The book puts three skills at the centre of its idea of moving beyond wage income.

  1. Managing cash flow
  2. Managing systems
  3. Managing people

The list could also describe learning to run a business. Kiyosaki puts four kinds of knowledge behind his idea of financial literacy.

  1. Accounting
  2. Investing
  3. How markets work
  4. Law

None is acquired overnight. What happens in markets can change quickly, which gives you a reason to keep learning after you know the basics.

Five Habits That Get in the Way

Kiyosaki points to five obstacles he believes keep people from using what they know about money.

  1. Fear of loss
  2. Cynicism
  3. Laziness
  4. Habit
  5. Arrogance

His argument is that how you respond to a loss or to uncertainty matters alongside what you know.

Ten Sources of Leverage

Later the book collects ten things the author finds useful in developing his approach to money.

  1. A reason strong enough to keep going
  2. The ability to choose
  3. The company you keep
  4. Learning quickly
  5. Self-discipline
  6. Paying capable brokers well
  7. Getting back the capital you put in
  8. Focus
  9. Finding people whose example you can learn from
  10. Giving to others

Taken together, they make a case for sustained learning and enough confidence to use what you learn.

Rich Dad Poor Dad remains an accessible entry into a way of thinking about cash flow. The age of the book shows in places, but its simple comparisons still make it easy to ask where your money goes and what it does once it gets there.

Book Information

Rich Dad Poor Dad

Authors
Robert T. Kiyosaki and Sharon L. Lechter (original edition)
Publication
10 February 2000 (Korean edition)
ISBN13
9788982732362
View the book on YES24

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