The Money Divide: Rich Dad, Poor Dad

Rich Dad, Poor Dad“The only way to get out of the “Rat Race” is to prove your proficiency at both accounting and investing, arguably two of the most difficult subjects to master.”

This quote in the book Rich Dad, Poor Dad aptly summarizes the central theme of the book, by Robert T. Kiyosaki. All through the book, Kiyosaki has put special emphasis on the need for working individuals to get out of the vicious circle of salaries and bills to escalate to a level where money works for them. This would take them out of the “rat race” that all of us are a part of.

The author constructs the story on the basis of his experiences with the two dads. One is his biological father who happens to be well- educated and intelligent, earning himself scholarships during the course of his education, ultimately securing a Ph.D. He pursued a career in education and became the head of the education department of the State of Hawaii. Kiyosaki calls him the ‘poor dad’. He is poor because even after years of working hard, he is caught up in financial struggles.

The other dad, ‘rich dad’, is the author’s best friend’s dad, who is a successful local businessman. He is a school drop-out and does not believe in the text-book education provided in school.

The story is narrated in the form of lessons that the author’s rich dad gives to him. The underlying message in all of them is that prudent financial investment makes money multiply. The middle class remains in the grips of taxes and payments because of their reluctance to capitalize on the investment opportunities in the economy. Most of the times, due to ignorance, the difference between an asset and liability are not known and hence instead of adding to income, cash flows out as expenses. On the lines of this idea, Kiyosaki challenges the notion of a house being an asset, as according to conventional accounting.

One of the most interesting part of the book is the part where the author distinguishes a business from a profession. The school education prepares us for a good job which remains our only source of income. The time in job is spent minding someone else’s business. Kiyosaki suggests that apart from a job, everyone must have a business as an additional source of income, thus highlighting the importance of self-employment.

Kiyosaki does not fail to mention the lack of financial know-how among the youth, who have picked up using credit cards without giving second thoughts to the mechanism that goes into the working of compound interest.

The book definitely is an interesting read, a far cry from all those which promise to teach the method to become a millionaire in 100 simple steps. But at times, the anecdotes and the advices sound too clichéd, without really meaning something concrete, which can be applied to the real world. In fact, the financial advice given in the book has been criticized by many investors and has been branded as dangerous with discrepancies in given factual information. John T. Reed, a former real estate investor finds fault with the book and says, “I was unpleasantly surprised. I do not like his book at all.”

As many reviews have already pointed out, the book may not be the best place to look for sound investing solutions; nevertheless it does succeed at making the readers seriously consider the state of their financial affairs.