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INTRODUCTION
There is a Need
Does school prepare children for the real world? "Study hard and get good grades and
you will find a high-paying job with great benefits," my parents used to say. Their
goal in life was to provide a college education for my older sister and me, so that
we would have the greatest chance for success in life. When T finally earned my diploma
in 1976-graduating with honors, and near the top of my class, in accounting from Florida
State University-my parents had realized their goal. It was the crowning achievement
of their lives. In accordance with the "Master Plan," I was hired by a "Big 8" accounting
firm, and I looked forward to a long career and retirement at an early age.
My husband, Michael, followed a similar path. We both came from hard-working families,
of modest means but with strong work ethics. Michael also graduated with honors, but
he did it twice: first as an engineer and then from law school. He was quickly recruited
by a prestigious Washington, D.C., law firm that specialized in patent law, and his
future seemed bright, career path well-defined and early retirement guaranteed.
Although we have been successful in our careers, they have not turned out quite as
we expected. We both have changed positions several times-for all the right reasons-but
there are no pension plans vesting on our behalf. Our retirement funds are growing
only through our individual contributions.
Michael and I have a wonderful marriage with three great children. As I write this,
two are in college and one is just beginning high school. We have spent a fortune
making sure our children have received the best education available.
One day in 1996, one of my children came home disillusioned with school. He was bored
and tired of studying. "Why should I put time into studying subjects I will never
use in real life?" he protested.
Without thinking, I responded, "Because if you don't get good grades, you won't get
into college."
"Regardless of whether I go to college," he replied, "I'm going to be rich."
"If you don't graduate from college, you won't get a good job," I responded with a
tinge of panic and motherly concern. "And if you don't have a good job, how do you
plan to get rich?"
My son smirked and slowly shook his head with mild boredom. We have had this talk
many times before. He lowered his head and rolled his eyes. My words of motherly wisdom
were falling on deaf ears once again.
Though smart and strong-willed, he has always been a polite and respectful young man.
"Mom," he began. It was my turn to be lectured. "Get with the times! Look around;
the richest people didn't get rich because of their educations. Look at Michael Jordan
and Madonna. Even Bill Gates, who dropped out of Harvard, founded Microsoft; he is
now the richest man in America, and he's still in his 30s. There is a baseball pitcher
who makes more than $4 million a year even though he has been labeled `mentally
challenged.' "
There was a long silence between us. It was dawning on me that I was giving my son
the same advice my parents had given me. The world around us has changed, but the
advice hasn't.
Getting a good education and making good grades no longer ensures success, and nobody
seems to have noticed, except our children.
"Mom," he continued, "I don't want to work as hard as you and dad do. You make a lot
of money, and we live in a huge house with lots of toys. If I follow your advice,
I'll wind up like you, working harder and harder only to pay more taxes and wind up
in debt. There is no job security anymore; I know all about downsizing and rightsizing.
I also know that college graduates today earn less than you did when you graduated.
Look at doctors. They don't make nearly as much money as they used to. I know I can't
rely on Social Security or company pensions for retirement. I need new answers."
He was right. He needed new answers, and so did I. My parents' advice may have worked
for people born before 1945, but it may be disastrous for those of us born into a
rapidly changing world. No longer can I simply say to my children, "Go to school,
get good grades, and look for a safe, secure job."
I knew I had to look for new ways to guide my children's education.
As a mother as well as an accountant, I have been concerned by the lack of financial
education our children receive in school. Many of today's youth have credit cards
before they leave high school, yet they have never had a course in money or how to
invest it, let alone understand how compound interest works on credit cards. Simply
put, without financial literacy and the knowledge of how money works, they are not
prepared to face the world that awaits them, a world in which spending is emphasized
over savings.
When my oldest son became hopelessly in debt with his credit cards as a freshman in
college, I not only helped him destroy the credit cards, but I also went in search
of a program that would help me educate my children on financial matters.
One day last year, my husband called me from his office. "I have someone I think you
should meet," he said. "His name is Robert Kiyosaki. He's a businessman and investor,
and he is here applying for a patent on an educational product. I think it's what
you have been looking for."
Just What I Was Looking For
My husband, Mike, was so impressed with CASHFLOW, the new educational product that
Robert Kiyosaki was developing, that he arranged for both of us to participate in
a test of the prototype. Because it was an educational game, I also asked my 19-year-old
daughter, who was a freshman at a local university, if she would like to take part,
and she agreed.
About fifteen people, broken into three groups, participated in the test.
Mike was right. It was the educational product I had been looking for. But it had
a twist: It looked like a colorful Monopoly board with a giant well-dressed rat in
the middle. Unlike Monopoly, however, there were two tracks: one inside and one outside.
The object of the game was to get out of the inside track-what Robert called the "Rat
Race" and reach the outer track, or the "Fast Track." As Robert put it, the Fast Track
simulates how rich people play in real life.
Robert then defined the "Rat Race" for us.
"If you look at the life of the average-educated, hard-working person, there is a
similar path. The child is born and goes to school. The proud parents are excited
because the child excels, gets fair to good grades, and is accepted into a college.
The child graduates, maybe goes on to graduate school and then does exactly as
programmed: looks for a safe, secure job or career. The child finds that job, maybe
as a doctor or a lawyer, or joins the Army or works for the government. Generally,
the child begins to make money, credit cards start to arrive in mass, and the shopping
begins, if it already hasn't.
"Having money to burn, the child goes to places where other young people just like
them hang out, and they meet people, they date, and sometimes they get married. Life
is wonderful now, because today, both men and women work. Two incomes are bliss. They
feel successful, their future is bright, and they decide to buy a house, a car, a
television, take vacations and have children. The happy bundle arrives. The demand
for cash is enormous. The happy couple decides that their careers are vitally important
and begin to work harder, seeking promotions and raises. The raises come, and so does
another child and the need for a bigger house. They work harder, become better employees,
even more dedicated. They go back to school to get more specialized skills so they
can earn more money. Maybe they take a second job. Their incomes go up, but so does
the tax bracket they're in and the real estate taxes on their new large home, and
their Social Security taxes, and all the other taxes. They get their large paycheck
and wonder where all the money went. They buy some mutual funds and buy groceries
with their credit card. The children reach 5 or 6 years of age, and the need to save
for college increases as well as the need to save for their retirement. .
"That happy couple, born 35 years ago, is now trapped in the Rat Race for the rest
of their working days. They work for the owners of their company, for the government
paying taxes, and for the bank paying off a mortgage and credit cards.
"Then, they advise their own children to `study hard, get good grades, and find a
safe job or career.' They learn nothing about money, except from those who profit
from their naïveté, and work hard all their lives. The process repeats into another
hard-working generation. This is the `Rat Race'."
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. As a trained
CPA who once worked for a Big 8 accounting firm, I was surprised that Robert had made
the learning of these two subjects both fun and exciting. The process was so well
disguised that while we were diligently working to get out of the "Rat Race," we quickly
forgot we were learning.
Soon a product test turned into a fun afternoon with my daughter, talking about things
we had never discussed before. As an accountant, playing a game that required an Income
Statement and Balance Sheet was easy. So I had the time to help my daughter and the
other players at my table with concepts they did not understand. I was the first
person-and the only person in the entire test group-to get out of the "Rat Race" that
day. I was out within 50 minutes, although the game went on for nearly three hours.
At my table was a banker, a business owner and a computer programmer. What greatly
disturbed me was how little these people knew about either accounting or investing,
subjects so important in their lives. I wondered how they managed their own financial
affairs in real life. I could understand why my 19-year-old daughter would not
understand, but these were grown adults, at least twice her age.
After I was out of the "Rat Race," for the next two hours I watched my daughter and
these educated, affluent adults roll the dice and move their markers. Although I was
glad they were all learning so much, I was disturbed by how much the adults did not
know about the basics of simple accounting and investing. They had difficulty grasping
the relationship between their Income Statement and their Balance Sheet. As they bought
and sold assets, they had trouble remembering that each transaction could impact their
monthly cash flow. I thought, how many millions of people are out there in the real
world struggling financially, only because they have never been taught these subjects?
Thank goodness they're having fun and are distracted by the desire to win the game,
I said to myself. After Robert ended the contest, he allowed us fifteen minutes to
discuss and critique CASHFLOW among ourselves.
The business owner at my table was not happy. He did not like the game. "I don't need
to know this," he said out loud. "I hire accountants, bankers and attorneys to tell
me about this stuff."
To which Robert replied, "Have you ever noticed that there are a lot of accountants
who aren't rich? And bankers, and attorneys, and stockbrokers and real estate brokers.
They know a lot, and for the most part are smart people, but most of them are not
rich. Since our schools do not teach people what the rich know, we take advice from
these people. But one day, you're driving down the highway, stuck in traffic,
struggling to get to work, and you look over to your right and you see your accountant
stuck in the same traffic jam. You look to your left and you see your banker. That
should tell you something."
The computer programmer was also unimpressed by the game: "I can buy software to teach
me this."
The banker, however, was moved. "I studied this in school-the accounting part, that
is-but I never knew how to apply it to real life. Now I know. I need to get myself
out of the `Rat Race.' "
But it was my daughter's comments that most touched me. "I had fun learning," she
said. "I learned a lot about how money really works and how to invest."
Then she added: "Now I know I can choose a profession for the work I want to perform
and not because of job security, benefits or howmuch I get paid. If I learn what this
game teaches, I'm free to do and study what my heart wants to study. . .rather than
study something because businesses are looking for certain job skills. If I learn
this, I won't have to worry about job security and Social Security the way most of
my classmates already do."
I was not able to stay and talk with Robert after we had played the game, but we agreed
to meet later to further discuss his project. I knew he wanted to use the game to
help others become more financially savvy, and I was eager to hear more about his
plans.
My husband and I set up a dinner meeting with Robert and his wife within the next
week. Although it was our first social get-together, we felt as if we had known each
other for years.
We found out we had a lot in common. We covered the gamut, from sports and plays to
restaurants and socio-economic issues. We talked about the changing world. We spent
a lot of time discussing how most Americans have little or nothing saved for retirement,
as well as the almost bankrupt state of Social Security and Medicare. Would my children
be required to pay for the retirement of 75 million baby boomers? We wondered if people
realize how risky it is to depend on a
pension plan.
Robert's primary concern was the growing gap between the haves and have nots, in America
and around the world. A self-taught, self-made entrepreneur who traveled the world
putting investments together, Robert was able to retire at the age of 47. He came
out of retirement because he shares the same concern I have for my own children. He
knows that the world has changed, but education has not changed with it. According
to Robert, children spend years in an antiquated educational system, studying subjects
they will never use, preparing for a world that no longer exists.
"Today, the most dangerous advice you can give a child is `Go to school, get good
grades and look for a safe secure job,' " he likes to say. "That is old advice, and
it's bad advice. If you could see what is happening in Asia, Europe, South America,
you would be as concerned as I am."
It's bad advice, he believes, "because if you want your child to have a financially
secure future, they can't play by the old set of rules. It's just too risky."
I asked him what he meant by "old rules?" .
"People like me play by a different set of rules from what you play by," he said.
"What happens when a corporation announces a downsizing?"
"People get laid off," I said. "Families are hurt. Unemployment goes
up."
"Yes, but what happens to the company, in particular a public company on the stock
exchange?"
"The price of the stock usually goes up when the downsizing is announced," I said.
"The market likes it when a company reduces its labor costs, either through automation
or just consolidating the labor force in general."
"That's right," he said. "And when stock prices go up, people like me, the shareholders,
get richer. That is what I mean by a different set of rules. Employees lose; owners
and investors win."
Robert was describing not only the difference between an employee and employer, but
also the difference between controlling your own destiny and giving up that control
to someone else.
"But it's hard for most people to understand why that happens," I said. "They just
think it's not fair."
"That's why it is foolish to simply say to a child, `Get a good education,' " he said.
"It is foolish to assume that the education the school system provides will prepare
your children for the world they will face upon graduation. Each child needs more
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