Why Teach Financial Literacy?

Robert Kiyosaki's Rich Dad gave him a single rule for becoming wealthy:

Know the difference between an asset and a liability.
Buy assets, and stay away from liabilities.

IF YOU WANT TO BE RICH, THIS IS ALL YOU NEED TO KNOW.

So what is an asset?

• An asset is defined not by words, but by numbers.
• An asset is something that puts money into your pocket.
• A liability is something that takes money out of your pocket.

Robert's Rich Dad drew a further contrast between "Rich people", and otherwise, as follows:

• Rich people acquire assets.
• The middle class acquire liabilities (but think they're assets).
• Poor people have expenses. And sometimes liabilities. But definitely no assets.

Consider the following example:

• Ronny owns an ant farm. He wasn't able to afford the $25 to buy it with his own pocket money. So he convinced his Mom to loan him the money, and promised to pay it back. She charged him 10% interest.
  Ronny mows a lawn or two each weekend, but only makes a dollar per lawn. He loves his ant farm. But it's taking the little money he has, out of his pocket. Ronny owns a liability. (And is in debt, to boot.)
  
  

• Bobby owns an ant farm. He had more than $25 saved in his piggy bank. So he didn't even have to ask - he broke that piggy bank, and came home with the deluxe ant farm! All cash, and not owing a soul! Awesome! But it took money out of his pocket. So he also owns a liability.
  
  

• Ricky owns an ant farm. Although he had more than $25 saved, he got his Mom to loan him $20 for it. He only had to pay $5 of his own money. She charged him 10% interest. But here's what Ricky did - each week, he charges the neighborhood kids 50 cents apiece to come and look at his ant farm.
  

  He got some old, donated ant books from the library to boot, and even has the movie "It's a Bug's Life" showing on the little TV in his play area, when the kids come over. In no time, Ricky has paid his Mom back, and is making money every weekend. Ricky owns an asset.

If you want to be rich, you have to be financially literate.

IT'S NOT HOW MUCH YOU MAKE - IT'S HOW MUCH YOU KEEP.