Wednesday, March 12, 2014

Why "A" students work for "C" Students

Robert T. Kiyosaki of Rich Dad, Poor Dad fame wrote a book for parents, Why "A" students work for "C" Students and "B" Students Work for the Government. Warning: if you are liberal in your political leaning, you may find many issues with his premise. He believes that schools fail to provide a sound financial education to students because a) they don't know how and b) they are incented to keep students ignorant of financial education so that the government can benefit from their ignorance. He describes this book as a manual for financial education for parents to help them teach their children. Individuals with a sound basic financial education, he proposes, have an unfair advantage over those who do not.

Kiyosaki points out that the top 1% of income earners pay nearly 40% of all income taxes and the bottom 50% pay only about 3% of all income taxes. That leaves the majority of the tax burden (approximately 57%) to fall on the middle class. Both Democrats and Republicans, he asserts, want to save the middle class because they pay the taxes that support the hulking governmental machines that compose these groups.

Kiyosaki divides earnings into four quadrants: E- employees; S- self employed; I- investment; and B- business owners. Taxes are highest in the E and S quadrants. Government need highly capable people to put money into investments and it needs people to start and own those large corporations to hire the other people and house their populace. That is why large business owners do not pay high taxes- the alleged "loop holes" people complain of. They are doing the work that the government wants done, so they are rewarded. The author assert the unfair advantage starts with understanding this concept and going from there.

I listened to the audio version of this book. It is particularly suited to an audio format because the pace is slow, the content not dense and the book includes lots of repetition. It almost seems as if the book was meant to be read out loud rather than read silently.

While you may not agree with many of his theories, the book does offer some thoughts on how to look at financial education and understand that schools do not offer this concept. At our district they instituted a Finance Tech class which appeared to be light on finance and high on tech- how to use Excel, Publisher and Word. (Fortunately we only offer a one semester computers class in middle school to teach the Microsoft suite, so the kids cannot possibly be expected to have learned them.)  They did not teach about insurance or debt, but did make a poster that used a list of Word special features for an activity of interest. If we truly want to avoid another financial meltdown we need to teach kids about debt, assets and liabilities, not how to make pretty posters with curved text, multiple text effects, and pretty pictures.

We need to teach them about college education being something that enhances your lifetime earnings only if you have a skill associated with it. Expensive college degrees in liberal arts can result in significantly lower lifetime earnings than a two year associates degree. All college debt is not created equal. If a child needs to take remedial classes because he did not apply himself in high school or the standards at the school were too low, the courses should not be taken at a four year institution. Parents who carry debt or pay for such things are not helping their kids, they are perpetuating the problem.

Kiyosaki does not see the picture as impossible. He believes that people with the unfair advantage of a financial education can be successful and should be more successful than those who do not have such an advantage. He argues that schools should change, but that the rate of bureaucratic change is slow and teaching your children ahead of the curve will give them the unfair advantage that may enable them to become truly rich. Mostly, he argues, that if we do not begin the path to change, our country will farther and farther away from capitalism and closer and closer to socialism and economic ruin.

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