A paycheck does not make you rich. It is what you do with that paycheck that makes a person rich, poor, or middle-class.
Those were the words of Robert Kiyosaki’s rich dad in his book Rich Kid Smart Kid. Throughout his books, starting with Rich Dad Poor Dad, Kiyosaki compares the career and financial lessons he learned from his biological dad to those of his best friend’s dad. His own dad, whom he refers to as his poor dad, taught him to get an education then find a good paying job. His best friend’s dad was his rich dad who taught him to become an entrepreneur and investor. In the section of the book quoted above, Kiyosaki’s rich dad was teaching him that earning additional income will not guarantee he would become wealthy.
Well, one of the better formulas for wealth is found right here on the Monopoly board.
Kiyosaki’s rich dad was using the game of Monopoly to explain how passing Go earns one an income and by channeling that income into purchasing and developing real estate one is able to collect money as other people travel around the board. His rich dad was teaching him to build wealth by purchasing assets that generate income. What is wealth? In Kiyosakis’s first book, Rich Dad Poor Dad, he writes “Wealth is a person’s ability to survive so many number of days forward…or if I stopped working today, how long could I survive.” Further in the book, Kiyosaki discusses how his rich dad taught him to invest in assets and once a dollar is invested, never take it out. He writes, “Think of it this way, once a dollar goes into your asset column, it becomes your employee. The best thing about money is it works 24 hours a day and can work for generations.” George Clason explained the same concept in his 1920s fictional book The Richest Man in Babylon. Using the dialog between two characters, Clason refers to the income generated from an investment as the children of that investment. When we spend the money generated from an asset, that money can no longer work to generate additional income in the future. Clason introduced the concept when his character tells a friend, “You do eat the children of your savings. Then how do you expect them to work for you? And how can they have children that will also work for you? First, get thee an army of golden slaves and then many a rich banquet may you enjoy without regret.” Both Kiyosaki and Clason are referring to the power of compound interest, something I wrote about in my post Turning something small into something big.
In both Rich Dad Poor Dad and Rich Kid Smart Kid, Kiyosaki talks about his love of playing Monopoly as a kid and how nobody told him he couldn’t play it in real life as an adult. He found his winning formula for building wealth while playing the game. Kiyosaki recommends teachers and parents use games like Monopoly as a tool to engage students in wanting to learn. Quoting again from Rich Kid Smart Kid, he writes, “One of the most important things I learned from Monopoly was my winning formula. I knew that all I had to do was buy four houses and convert them into a red hotel. I did not know how specifically I was going to do it, but I knew I could do it…at least that was my perception of myself at the time.” In the next paragraph, he further states that students are failing today because they lack motivation or understanding to engage in learning. He adds, “I think many students would be more interested in studying if they started playing Monopoly in the first grade and then were asked which of them wanted to join the ‘Who Wants to be A Millionaire When You Graduate?’ curriculum….The child might be really willing to study it, because the reward at the end was exciting and worth studying for.”
Warren Buffett, the legendary investor used to play Monopoly as a boy and dream of the riches he would accumulate. If Kiyosaki’s advice worked for Buffett, maybe it would work for us and our children. Pick up the original classic Monopoly game and begin to play it according to the original rules. No landing on Free Parking and getting money from a pot. No waiting to go around the board to buy property. In fact, you should auction unsold properties when someone lands on it and doesn’t want to buy it. The auctioned price can be greater or lower than the advertised price. There are many lessons to be learned from playing the game including how to dream big.