INCREASE YOUR FINANCIAL IQ
One
of the greatest failures of the educational system is the failure to provide financial education to students. Educators seem to think that money has
Some
sort of quasi-religious or cult-like taint to it, believing that the
love of money is the root of all evil.
As
most of us know, it is not the love of money that is evil—it is the lack of
money that causes evil. It is working at a job we hate that is evil. Working hard
yet not earning enough to provide for our families is evil. For some, being deeply
in debt is evil. Fighting with people you love over money is evil.
Being
greedy is evil. And committing criminal or immoral acts to get money is
evil. Money by itself is not evil. Money is just money.
The
lack of financial education also causes people to do stupid things or be misled
by stupid people. For example, in 1997, when I first published Rich Dad
Poor Dad and
stated that “Your house is not an asset . . . your house is a
liability,” howls of protest went up. My book and I were severely criticized.
in
2007, as the credit markets crumbled and millions of people were in financial
free fall—many losing their homes, some declaring bankruptcy, others owing more
on their house than it was worth as real estate dropped
in
value—these individuals painfully found out that their homes are
indeed liabilities, not assets.
"As quoted in the book “Rich dad, Poor dad”, If you want to be rich you must know the difference between an asset and liability and you must buy assets. This may sound absurdly simple, but most people have no idea how profound this rule is. Most people struggle financially because they do not know the difference between an asset and a liability. “Rich people acquire assets. The poor and middle class acquire liabilities that they think are assets."
A very simple way to understand asset and liability is this :
“An asset puts money in my pocket. A liability takes money out of my pocket.”
.Obsolete
Advice
Today,
many financial experts continue to recommend, “Work hard, save money,
get out of debt, live below your means, and invest in a well-diversified portfolio
of mutual funds.” The problem with this advice is that it is bad
advice—simply
because it is obsolete advice. The rules of money have changed.
They changed in 1971. Today there is new capitalism. Saving money, getting
out of debt, and diversifying worked in the era of old capitalism.
Those
who follow the “work hard and save money” mantra of old capitalism will
struggle financially in the era of new capitalism.
It is
this author’s opinion that the lack of financial education in our school systems
is a cruel and evil shame. In today’s world, financial education is absolutely essential
for survival, regardless of whether we are rich or poor, smart or not smart.
As
most of us know, we now live in the Information Age. The problem with the
Information Age is information overload. Today, there is too much
information. The equation below explains why financial education is so important.
By Robert
T. Kiyosaki
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