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Rich Dad Poor Dad

Why Learn Financial Literacy?

The author reveals the secrets of financial literacy when it comes to getting rich and emphasizes the fact that the rich really do get richer over time.


The author raises concern about the fact that people are concerned with getting as much money as they can but fail to realize that their greatest wealth is their education.


He continues to emphasize on the importance of financial literacy because without it, even if one is rich, he can end up broke. He cited some examples of some of the professional athletes and celebrities who made poor financial decisions and were in financial distress.


Mantra to become rich: You must know the difference between an asset and a liability and always focus towards buying assets.


Rich people acquire assets, whereas the poor and the middle-class people are busy acquiring liabilities that they think are assets.


The key feature about an asset that distinguishes it from a liability is that assets result in making money for us, helping us become rich. 


Students leave school without acquiring financial skills and that’s the reason why they are concerned with professional success and not with financial stability. 


They fail to understand that spending the money you have is not the way of life and this is caused by lack of financial literacy.



Why do the rich keep getting richer?


The assets of the rich people generate income which is high enough to cover their expenses. The remaining balance income is further reinvested in buying more assets. This way, their assets continue to grow, and so does their income.


On the other hand, the poor and the middle-class people remain poor because they do the opposite and pile up their liabilities. One has to understand that it is not how much one can earn, but how much one can keep and save that truly makes him rich.


The real evil here is lack of financial education. The reason the middle-class have to play it safe is because they couldn’t get their hands-on financial literacy at a young age and now they have a lot of liabilities hovering over their head. Their only source of income is their monthly salary checks. Their livelihood is completely dependent on their employer.


A simple observation;

  • The rich buy assets 
  • The poor have expenses
  • The middle class buy liabilities that they think are assets.

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Units 4/11