Up to this point most of my articles have talked about scholastic and academic literacy. While scholastic education is an important means for many people to start careers, it has become evident to me that financial literacy is equally, if not more, important. It is particularly important in these current times when the country is facing significant economic hardships, and when the pursuit of a college education is becoming steadily more expensive for students hoping to solidify a career.
Thus moving forward, my voice and credibility here on the Examiner will discuss various aspects of this area, in addition to topics associated with traditional scholastic education and literacy. Not being a millionaire myself, my writings will focus on encouraging financial literacy, my own stumbles in learning the world of investing, and finally what not to do. Learning what not to do is key in any area. This first series will discuss financial literacy and why it’s important.
“I bought a game by a guy named Robert Kiyosaki called Cash Flow. He wrote a book called Rich Dad Poor Dad and several other books about money. His game teaches you about money and investing,” a fellow graduate student and close friend at the University of Michigan shared with me in 2004. “I want to invite some people over to play the game one day. Would you be interested in coming over to play it?”
“Okay sure,” was my reply even though playing the game wasn't a priority for me at that time. Two things consumed my thoughts in those years; Salsa dancing and my graduate thesis. Shortly thereafter on a Sunday visit to Barnes and Noble, a purple colored book named Rich Dad Poor Dad caught my eye, and was subsequently purchased.
The book was an exciting read for me and got me thinking for the first time about financial literacy and investing. After telling my buddy about the book, he jokingly replied, “Yes, I told you about that a long time ago.”
One other thing that impressed me about my friend was that he was actively buying and selling stocks online at that time. Though we were graduate students and pretty much broke, he somehow allotted enough money to speculate with and invest. He had the foresight to think about his financial future.
Rich Dad Poor Dad eloquently introduced me to concepts not taught to me before such as the difference between assets and liabilities among others, and it caused me to think about money in new ways. It introduced the three types of income; earned (W-2), portfolio and passive. It discussed multiple ways of earning money, and how some ways are more tax- advantaged than others, something regularly debated in politics. It also introduced the concepts of good debt (makes you rich), and bad debt (makes you poor).
The book excited a lot of people, but sparked controversy as well due to several reasons. One of the most controversial was Robert Kiyosaki’s position that a person’s primary residence is not an asset, but instead a liability.
While his books earned rave reviews and excited quite a few people, a community of critics and detractors emerged. One of the main reasons was that his books challenged traditional paradigms about money. Another was that they did not go into specifics about how to get rich which is something that takes hours of study and practice if you weren't born into a wealthy and financially savvy family, which most of us aren't.
His books also taught me in direct and indirect ways that money can be a very emotional, polarizing and divisive topic. Everyone has their own distinct opinions on how to earn it, and what to do with it once you get a hold of it. While money and financial literacy can lead to a good life, they can also break up couples, friends, and families. They also drive politics in our nation and around the world. For these reasons among others, it is important to become educated about how money works and to encourage financial literacy.
This article will be continued in part two of this series.