Personal Finance Interview with Rich Dad's Robert Kiyosaki

In the U.S., things aren't looking good for the middle class. Life and the goods we need to sustain it are becoming more and more expensive; meanwhile wages have been stagnating for decades, says personal finance guru Robert Kiyosaki. To make matters worse, the housing market -- the one source of increased wealth for many families -- suffered a devastating crash.

"Today, most middle class families live from paycheck to paycheck, or worse, with very little in savings or invested for retirement," says Kiyosaki. "At this point, the middle class might become the working class in that they'll have to work their whole lives."

But the man behind the bestseller "Rich Dad Poor Dad" adds that there are still plenty of opportunities for those who want to thrive financially. And the key to thriving is financial education and learning how investing works in today's world.

For Robert's advice on making your money work for you and for starting your kids on a track to financial success, read on:

Tell us about yourself ... what's your professional background?

I went to the U.S. Merchant Marine Academy in Kings Point because I wanted to learn about leadership. From there I joined the Marine Corp as a helicopter pilot, fighting in the Vietnam War because it was the right thing to do.

After the war, I joined Xerox because they had the best sales training program at the time and I wanted to know how to sell. I then started two businesses, a Velcro surfer wallet business and a T-shirt business. Both failed and I racked up $1 million in debt, and lived out of my car with my wife, Kim, for a short time. We paid back all that debt, and began investing in real estate and found success.

Taking the lessons I'd learned from our failures as well as our successes in business and investing, I founded my financial education company, The Rich Dad Company, in 1997. During that time I created a board game called CASHFLOW® 101 to teach financial concepts, and then wrote a book intended to be an instruction manual for the game. The book was called "Rich Dad Poor Dad" and that book went on to become the best-selling personal finance book in history with nearly 30 million copies sold worldwide. Since then, I've written a number of other books and have spoken around the world, teaching financial concepts and working as an advocate for financial education. In addition to my financial education company, I'm very active in investing in real estate and commodities like gold, silver, and oil.

What makes you so passionate about personal finance?

Growing up as a young boy in Hawaii, I saw first hand how my own family, as well as other families that worked the plantations, were struggling financially. I remember seeing how defeated and frustrated my father looked when it came time to pay the bills each month, and how so many of his dreams were crushed because of his struggle to make ends meet. I decided that I never wanted to live like that, and that I wanted to do what I could to help others never have to live like that either. To me, financial education is the key to helping people live prosperous and fulfilling lives. It's the opportunity to find true freedom because when you don't have to worry about money, you're free to focus on the things that mean the most to you.

We're guessing with the enormous success of "Rich Dad" that you feel pretty financially secure. But what habits should everyone, from the most cash-strapped to the comfortable, get into in order to become or remain financially solvent?

The first step is to increase your financial intelligence through financial education. Read books, attend seminars, and build a network of smart financial friends and advisors. Once you understand how money works and how you can make it work for you, you're well ahead of the majority of people.

On a very practical level, don't go into bad debt trying to live a lifestyle that you can't afford. Lots of people buy things like televisions, cars, clothes and vacations on credit, convincing themselves that they need these things. But those items are liabilities. They take money out of your pocket and don't put any money in. Instead, put financial education into action and start with small investments in assets that produce cash flow each month and build up your investments until the cash flow allows you to enjoy life's luxuries.

We love the idea of using a graphic novel to teach kids about money like you did with "Escape the Rat Race." Why do you think its so important for kids to learn about finances?

This is something I wrote extensively about in my latest book, "Why "A" Students Work for "C" Students." Kids have a wonderful capacity to dream. The world is open to them in a way we, as adults, sometimes have a tough time remembering. And when they are young, their minds are very open to new ideas and concepts. It's those same ideas and concepts that become their concrete reality, shaping who they become later in life. Traditional education prepares kids well to be employees, which is really working to help achieve someone else's dream. I believe financial education gives kids the tools to achieve financial freedom and pursue their dreams without any limitations.

Additionally, the financial world -- the entire world -- has changed significantly since we were kids, yet we still teach our children the same old financial principles, like go to a good school, get a good job, save money, buy a house, and invest in a diversified portfolio of stocks, bonds, and mutual funds. The problem is that those rules of money are obsolete; they don't work any longer, and there are a whole set of new rules for financial success. Teaching kids about how money really works sets them up to be successful in this new financial reality. And, as we like to say at Rich Dad: Knowledge is the new money.

What have you learned are some of the best ways to talk to kids about money? What about the worst?

A lot of what we teach our kids about money has to do with a scarcity mentality. We say things like, "Live below your means" and "We can't afford that." Also, sometimes we teach our kids to look at money as bad, saying, "Money is the root of all evil."

The reality is that the correct quote is, "The love of money is the root of all evil." Ironically, I think the scarcity mentality of money is really the love of money. It's a fear of losing money that causes us to protect it so much and not take risks. The best way to talk about money with kids is to show them the world of opportunity before them and teach them that money is simply a tool for enjoying that world of opportunity. Say things like, "Live above your means" and "How can we afford that?" Teach them to look for (and find!) opportunities where others see only obstacles. That is a change in mindset that allows them to not work for money, but instead have money work for them.

How early should you talk to kids about money? When do you think kids should start managing their own money?

The short answer is as early as possible. Each child is different, so parents need to make their own judgment calls as to when their child is ready. But generally, I'd think you start having conversations around ages 6 or 7 ... conversations about money, how it works and the role it plays in our daily lives. From there you start building in practical lessons where they can put knowledge into action and build on each lesson. Your home can be an active and valuable learning environment for kids of all ages, and don't hesitate to take on projects or concepts where together, as a family, you learn new things about money.

In terms of managing their own money, track that with what they are learning in math. It makes math more fun, for one thing, and it allows them to apply the theoretical concepts they're learning to a real-world situation.

How can families as a whole work together to manage family finances better?

Managing finances is fine, but the exciting part is growing them. A great way to involve kids in the family finances is to do a few investment projects together where you allow the kids to learn about an asset class and help you find a good opportunity in which to invest some money. A friend of mine helps his kids think through and start little micro businesses like finding golf balls and selling them back to the golfers in the clubhouse. These are great lessons for kids to learn to put entrepreneurial thinking into practice and to keep their eyes and their minds open to opportunities.

What lessons have your readers taught you over the years about money management?

More than anything, I'm always amazed at the creative ways people have taken the Rich Dad concepts and put them into practice to find success. It gives you new perspectives and pathways to explore.

What's your favorite advice to give people who are struggling with debt?

Understand the difference between good and bad debt. Bad debt is debt that is used for liabilities. Again, a liability is anything that takes money out of your pocket. Good debt is debt that is used to purchase assets, which puts money in your pocket. Those who struggle with debt do so because they often make poor financial decisions to purchase things they can't afford. They take on bad debt constantly. My advice is to pay off your bad debt as quickly as possible and to never go into bad debt again. Instead, use your money to purchase assets rather than liabilities. Those assets will allow you to enjoy the finer things in life later on. Unfortunately, most people don't have the self-control or the patience for this.

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