Rich Dad Poor Dad for Teens: The Secrets About Money - That You Don't Learn in School!

“The rich own stock in the companies while others get paychecks. This fact leads to a different frame of mind, to say the least.”

Rules define how to win a game. But sometimes, in the real world, the rules can change, and we must be ready for this.

You’re probably familiar with the rule that says, “If you study hard and do well in school, you can go to a good college, learn a profession, graduate, get a good job, make lots of money, and be successful in life.” But having a profession is not the only way to earn money, especially if you want to make lots of it. Having a good job will certainly earn you a living but working for a salary isn’t the most effective path.

The most effective path to making a lot of money is ownership. Even if you work a regular job, own a side business, or invest in one, owning the source of your income allows you to multiply your productivity through employees, as well as the amount of money that flows back to you.

“Work to learn and to have your money work for you.”

Having a job is a good way to learn and identify opportunities to start your own business.

We learn differently in real life than in classrooms. Here, we don’t get to sit and listen to lectures because life doesn’t talk to us. It just sort of pushes us around, hoping that we’ll glean a lesson or two from each push.

When working for other people or even doing chores at home, life presents us with many opportunities to pick up character traits that can help us run our own businesses later on. We do so by constantly completing our tasks even when we get bored with them and taking full responsibility for our work results.

Focusing on the invaluable experiences work has to offer, rather than on the income and benefits, will teach you how to stop working for money and have money start working for you.

“The key to becoming rich will be your ability to convert ordinary earned income into passive income and portfolio income.”

We rarely have the opportunity to think about money in concrete ways as we grow up. That’s because all of our needs are taken care of. Food appears on the table, and we get clothing, heat, water, and electricity for free.

As children, we don’t always connect the dots between our parents going to work in the morning and returning home at night with all the supplies the family needs. However, as we grow older, we begin to realize that all these things don’t appear by magic. They’re all paid for with money. We start making the connection little by little, but we don’t always get the full picture. We think it’s all in the paycheck.

There are three ways to earn money: Ordinary earned income, passive income, and portfolio income.

Ordinary earned income is made through working a regular job and earning a paycheck. Passive income is earned when you’re not physically doing any work. It could be through rentals, royalties, or owning a business. Portfolio income is earned through investing in paper assets like stocks and bonds. It works on the same principle as passive income — your money works for you even while you sleep.

To create more money for yourself and become rich, you need to learn how to convert your ordinary earned income into passive and portfolio income.

“A financial statement tells us where our money is. And ideally, we want more income than expenses and more assets than liabilities.”

To become wealthy, you have to be able to read and understand financial statements. It’s an easy way to keep track of your assets and liabilities. Financial statements show the relationship between what you own and what you owe. Accountants and business owners rely on them to do their jobs and keep their businesses running smoothly.

Financial statements are made up of two parts: an income statement and a balance sheet. Income statements, also called profit-and-loss statements, simply show what money is coming in and what money is going out. They represent your income and expenses over a specific period of time. 

Balance sheets, on the other hand, show the relationship between assets and liabilities. They’re snapshots of one moment in time.

The pattern of money coming in and going out is called cash flow. By looking at the cash flow pattern, you can see which direction your money is going. Building wealth requires more money flowing in, in the form of income and assets, than flowing out in the form of liabilities and expenses.

“Money without financial intelligence is money soon gone.”

When you make money, you’ll need to put it somewhere. No matter what age you are, you should have a piggy bank of some sort—at least three, actually, to put money aside for specific purposes.

The first should be for charity. To be truly rich, you need to be able to give and receive. Giving money away is one of the best ways to help the world correct its wrongs. Buying things for yourself is great, but giving money to others is the best feeling in the world. You’ll get a taste of the true power of money.

The second should be for your savings. You should have money tucked away for a ‘rainy day.’ or unexpected events in your life that may impact your cash flow. In those times, this piggy bank will provide you with security. 

While saving money is good, it’s important not to save all your leftover income after expenses. Interests on savings accounts don’t usually amount to much.

Your main focus should be on the third piggy bank, which is for your investments. This represents risk and learning, buying and building assets. Investments typically earn more money than savings accounts do. They’re your best tools for creating wealth.

“Credit cards can be your worst nightmare, but not always. In fact, if you use a credit card wisely—that is, if you pay your bill on time—you’ll have an excellent opportunity to establish a good credit rating .”

Having a credit card is like having a blank check—that is until the bill comes. The credit card statement shows the date for when your payment is due and the amount. It shows both the full amount due and the minimum payment you can make.

Paying the minimum amount due on your balance usually means you’ll have to pay the price of an extremely high-interest rate. That’s almost like flushing money down the toilet!

If you want to take control of your credit card bills before they spin out of control, you should always make an effort to pay in full. It’s good to start the discipline while you’re still young. If you use your credit card wisely and pay your bills on time and in full, you’ll create a good credit rating. That'll help you later in life when you may need to borrow money to buy assets that’ll bring you passive income.