Kiyosaki, like Suze Orman are two frequent columnists at Yahoo! Finance that I regularly read. Even though I read their ramblings I generally do not entirely agree with them. Whether it is a conflict of interest (online or off), tone or simply advice that is overly generic, something is typically amiss. On Monday when I saw Mr. Kiyosaki had updated his column I clicked through expecting to see some rhetoric as to how his father made him rich or why the poor deserve to be poor. Instead I was pleased to find something that was actually worth reading: the lack of financial education for children.
That problem is a lack of financial education. Why don’t we teach kids about money in school? Rich or poor, smart or not-so-smart, we all use money. Yet, while there are a few schools beginning to offer some financial education, it seems that most educators believe money isn’t a subject worthy of the hallowed halls of our learning institutions.
It is true, there is virtually no formal financial education in our school systems. Most education comes in the form of a very broad overview of economics. Granted, understanding how the economy works is important, but it is also very dry and has little to do with personal finances. Ask any student in high school how a mortgage works or what the APR on a loan or credit card actually means and you would likely be faced with a blank stare. They might be able to recite every bone in the human body or ask where the bathroom is in Spanish but couldn’t explain what a credit score is or how compound interest works.
Kiyosaki goes on for a bit about the history of debt in this country but he finishes up with some important observations. First, debt is not necessarily a bad thing. Debt is simply the leverage of using other people’s money. Wall Street does it, people who buy homes do it, it can be a great wealth building tool. The root of the problem is not with debt itself, it is that people don’t use debt as a tool for financial gain. Instead they use debt because they fail to grasp the consequences of using it improperly.
But their problem isn’t credit cards — it’s a lack of financial know-how. And at the root of that lack of knowledge is our school system and its archaic curriculum, which is out of touch with the way people really live.
Clearly, advising people to cut up their credit cards won’t solve the problem of excessive credit card debt. A pair of scissors won’t make anyone financially smarter, but some financial education just might.
So while I rarely comment on many of the finance pundits because of the points I mentioned above I found this installment of Why the Rich Get Richer actually had some value. If the schools fail to educate our children it is up to the parents. Lead by example and ensure your children are on the path to financial independence from day one.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
Understanding Cash Flow is understanding Financial Freedom. Nice article done and I appreciate the share. Thanx!
It makes me smile to think of Flexo sewing a pillow and doing needlepoint :)
I agree education is the key. Another thing Kiyosaki talks about elsewhere is teaching kids how to make money for themselves instead of being an employee. I think this is another important skill to teach children.
Most financial columnists constantly repeat simple, basic advice such as pay off credit cards, etc.
I was talking to a recent MBA graduate whose tax return I was preparing. I mentioned that the Roth IRA she had established was a very good move for someone her age. She said they had told her that in college. I commented that you couldn't depend on Social Security, and again she said they told her that in college. These seem like very simple and obvious concepts, but apparently it takes an MBA to learn about it in the educational system.
Proposing financial education in the school system is an easy point to agree with. I feel the same way. Nice article.
I agree that often Kiyosaki's advice is NOT what the average person should follow. However, he is correct that more people should be taught basic personal finance. As to making room for it in the curriculum I imagine you could integrate it into math courses. After teaching addition and subtraction, introduce the idea of a checkbook, and then have the students solve word problems around the topic: If Mary has her paycheck direct deposited into her bank accounts, with $100 into her savings, how much is deposited into her checking?
This is why I made educating my kiddos my number 1 priority for 2007! And myself along with them :D.
Certainly it is what could be considered a basic life skill and should be taught by the parents, but when the parents have virtually no finance education, riddled with debt, underfunded retirement and living beyond their means they are in no position to be trying to teach their children personal finance skills. Things have to start somewhere, and the parents aren't getting it done.
As far as school curriculum changes, there are many classes that could be replaced, or an even easier solution would be to take a basic economics or business class at the high school level and broaden it to incorporate personal finance issues as well.
One of the problems is that high school curriculums are moving towards more flexible scheduling that allows students/parents to tailor their courses to their liking with electives. I remember my senior year in high school where I virtually had one academic course and spent the rest of the day taking gym classes. One of those classes was called lifetime sports or something where we went bowling and learned how to play table tennis.
I have no doubt changes could be made to introduce a one semester course, or to incorporate personal finance into an existing home economics or finance course that could at least cover some of the basics that would get young people off to a much better start than they are now. But I also agree that parenting will embed the bad habits long before schooling can have any effect and it should start with the parents.
So which subject should the schools remove from the already-overcrowded public school curriculum to fit in a required class on personal finances?
Personal finances and money management *should* be simple enough that it's the parents' responsibility, not the schools'.
Maybe money management can be a small part of "home ec" in the middle school years... I would have gotten more out of that than I did from sewing a pillow and needlepoint.
You are correct, Trent. This in all likelihood will be the only time he will be mentioned here in a positive light. Most of his stuff has no business being mentioned alongside sound personal finance advice.
While I agree wholeheartedly with Kiyosaki's sentiment here, it should be said that he often spouts nonsense that runs contradictory to every reasonable and sensible idea about financial management. If we had such basic financial education in schools, Kiyosaki wouldn't be nearly as well known as he is.