If you want to learn how to think about money and investing like the rich, then “Rich Dad Poor Dad” by Robert Kiyosaki is the book for you. It explains the different money habits of Kiyosaki’s two dads: one who was always broke despite being smart, and one who became very rich with little education.
The biggest lesson was that rich people don’t actually work for money. Instead, rich people make money work for them through investing and entrepreneurship. We’re usually taught to get a degree for a high-paying job, but higher incomes often just lead to higher debt. Kiyosaki shows that true wealth comes from understanding money and making smart investments.
Another bestselling finance book is “The Psychology of Money” by Morgan Housel. He studied wealthy investors like Warren Buffett and found common patterns in their thinking that helped them achieve financial success. Housel wrote, “Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know.” Key points include overcoming envy, being consistent, and having patience—because building wealth takes time.
📖 Summary by Chapter: Every chapter of “Rich Dad Poor Dad” explained in 5 minutes
First, you’ll get a quick overview of the key concepts and lessons you should know from each chapter of the book.
Chapter 1 Summary
- Growing Up With ‘Poor Dad’: The story begins with Robert Kiyosaki’s childhood. His real father was a teacher, well-educated but not highly paid and knowing little about money. At 9 years old, Kiyosaki and his friend Mike wanted to “make money” because they felt excluded at school for not being rich. Their first idea was to melt metal toothpaste tubes to create fake money, until Kiyosaki’s father explained it was illegal. He then suggested they talk to Mike’s dad, a successful businessman who agreed to teach them about money, becoming their “Rich Dad.”
- Working for ‘Rich Dad’: Robert and Mike started working for Mike’s Dad at his convenience stores, earning 10 cents an hour on weekends. After four weeks, Robert was frustrated and wanted to quit. When he confronted “Rich Dad,” he explained that he was teaching them through real-life experience. Life teaches us by pushing us around, and we must learn to respond to its lessons.
- Make Money Work For You: While most people trade their time for money, wealthy individuals find ways to make their money generate more income for them, even when they aren’t working. This is the biggest lesson from “Rich Dad.” The first chapter explains how Robert Kiyosaki first learned to identify these kinds of money-making opportunities.
- Learning to See Opportunity: Rich Dad taught them to control their emotions about money, explaining that most people are driven by fear and greed, which keeps them working hard without achieving financial freedom. He emphasized the importance of spotting opportunities. Robert and Mike noticed unsold comic books at the store and started a comic book library, charging kids to read. They made a profit and learned valuable lessons about business and money.
Chapter 2 Summary
- Importance of Financial Literacy: Most people think financial success is about how much money you make, but Kiyosaki says it’s really about how much you keep. Many people come into large sums of money, like lottery winners or certain celebrities and athletes, but lose it quickly because they lack financial literacy. On the other hand, today Mike successfully runs Rich Dad’s empire, and Kiyosaki retired at 47, thanks to the financial lessons they learned.
- Assets vs. Liabilities: The key to getting rich is understanding the difference between assets and liabilities. Assets generate income, while liabilities drain it. Rich people focus on acquiring assets, while the poor and middle class often mistakenly buy liabilities, thinking they are assets. Assets include stocks and real estate, while liabilities include cars and expensive fashion.
- Questioning Common Beliefs: Kiyosaki challenges the idea that a house is an asset since it doesn’t generate income. He stresses the importance of questioning common financial advice and thinking independently about wealth-building strategies. Most people don’t spend much time thinking about money and end up following the crowd, believing it’s the safest way.
Chapter 3 Summary
- Start Building Assets: Your real business is not your job but your assets. Start building assets that generate income or appreciate in value, like stocks, bonds, real estate, and intellectual property. Kiyosaki uses the example of Ray Kroc, who grew McDonald’s into a global brand, but often said his real business was not selling hamburgers, but owning the real estate beneath each restaurant.
- Focus on Assets, Not Just Income: Rich people prioritize building their assets rather than just focusing on their income. Most poor and middle-class people work their whole lives for others, believing the problem is their income is too low. Even people with high incomes like doctors often struggle financially because as their income grows, so do their liabilities and expenses. They never learned to invest in real assets, which is why they continue to face financial challenges.
- Reduce Expenses and Liabilities: Many people buy liabilities they think are assets, like a new car, and accumulate debt. To truly build wealth, reduce your expenses, avoid buying liabilities, and focus on growing your financial foundation of assets.
- Buy Luxuries Last: Avoid buying luxury items with your paycheck—that’s a money habit that prevents many people from building wealth. Instead, use your paycheck to buy assets that generate income for you, and then use your asset income to indulge in luxuries.
- Entrepreneurship is Not for Most. Kiyosaki began building wealth using income from his jobs in the Marines and Xerox. He advises keeping your day job while building your asset column, as many businesses fail within a few years. However, a good asset to buy are businesses that generate income without you needing to be there, like Kiyosaki’s friend who own car washes.
The Richest Man in Babylon is the classic personal finance book that popularized the expression “pay yourself first,” which means to first set aside some money from each paycheck before paying your other expenses and wants. The book uses stories set in the ancient desert as parables to teach you foundational principles of financial literacy like living on less than you earn, seeking advice from people who are successful, and “learning to make gold work for you.”
Chapter 4 Summary
- History of Taxes: Taxes start by targeting the rich but eventually hit the middle class and poor as government spending grows. In the end, the rich are less impacted as they find ways to reduce their tax burden.
- Benefits of Corporations: Corporations let you earn and spend before paying taxes, helping your assets grow faster. They also protect your personal wealth against lawsuits. In real estate, they allow you to defer capital gains taxes by continually “trading up” to a larger property, thanks to Section 1031 of the U.S. Tax Code.
- Xerox Story: Kiyosaki worked at Xerox, frustrated by his paycheck after all the deductions. Determined to become wealthy, he became a top 5 salesperson and invested his earnings in real estate through a corporation. Within 3 years he was earning more from investments than his job, so he used that passive income to buy a Porsche.
- Four Key Skills for Financial Intelligence:
- Accounting: Understanding and reading financial statements.
- Investing: Making money work for you.
- Market Understanding: Knowing supply and demand to decide when to invest.
- The Law: Using corporations to accelerate your wealth building.
Chapter 5 Summary
- Boldness Over Intelligence: Success often comes to those who take bold actions, not just the smartest. The good news is, we can get better at overcoming self doubt by practicing decisiveness, which will helps you spot and seize financial opportunities.
- Example of Spotting Opportunities: Kiyosaki bought a $60,000 home in Phoenix for $20,000 because it was a market downturn and a bankruptcy case. Then he sold it for $70,000 by running an ad. That gave him a $40,000 promissory note with 10% interest. He repeated this process 6 times, adding $190,000 to his assets and earning $19,000 per year in interest. This shows the importance of increasing financial intelligence so you can identify opportunities.
- Two Types of Investors: One type buys pre-packaged investments like mutual funds. The other creates custom investments, which can offer higher gains but come with greater risks. To succeed as the latter, learn to see unique opportunities, raise funds outside traditional banks, and hire knowledgeable advisors.
- Kiyosaki’s Investing Strategy: Kiyosaki mainly invests in real estate for a stable foundation. He also invests a much smaller portion in companies about to go public. This higher-risk strategy can sometimes result in his shares increasing by 10 times in value within a year.
Chapter 6 Summary
- Work to Learn: Kiyosaki stresses the importance of learning new skills beyond your profession to stay adaptable. His educated dad valued job security, while his rich dad valued continuous learning. The most important skills to learn include sales and marketing, so you can communicate effectively and overcome rejection. He shares a story of a writer whose books didn’t sell well; he advised her to take a sales class to improve.
- Learning from Diverse Experiences: Rich Dad advised knowing a little about many things, unlike the education system’s push for specialization. Being too specialized makes one vulnerable to market changes. For example, McDonald’s succeeds because of its exceptional business systems, not its burgers, highlighting the importance of diverse skills.
- Kiyosaki’s Career Path: Kiyosaki chose jobs for the skills he could gain rather than the salary. He started at Standard Oil to learn about trade, then joined the Marine Corps to develop leadership skills, and worked at Xerox to overcome shyness and learn sales. These experiences were invaluable when he later started his business importing wallets.
Chapter 7 Summary
- Managing Fear: Successful investors accept that failure is part of the process and use it as motivation to take bigger risks and achieve greater rewards. When Rich Dad felt nervous before a bid deal, he would “remember the Alamo,” the heroic soldiers who kept fighting when they knew they couldn’t win.
- Overcoming Cynicism: Focus on analyzing investing opportunities by looking at the facts, rather than listening to criticism and negative opinions. For example, people will avoid buying real estate saying “I don’t want to fix toilets,” but that’s why you find a great property manager.
- Combating Laziness: People often stay busy to avoid important tasks. Use a bit of greed as motivation. Instead of saying “I can’t afford it,” ask “How can I afford it?” This creates a stronger spirit and encourages creative thinking in generating income.
- Breaking Bad Habits: Rich Dad and Kiyosaki both “pay themselves first,” an idea from “The Richest Man in Babylon.” They invest in assets first before paying bills. This makes accountants nervous, but forces them to find new ways to make more money.
- Avoiding Arrogance: Arrogance, which is ignoring what you don’t know, leads to losing money. Always seek to learn from books and consult experts when you don’t know enough about a subject. Watch out for some financial experts who hide ignorance behind fake confidence.
Chapter 8 & 9 Summary
- Clarify your goals by writing down what you want and don’t want. Your reasons must be strong because the journey won’t be easy.
- Invest in your education by learning about stocks and real estate before investing. Most people will not do this. For example, he learned how to buy at foreclosure auctions while working at Xerox, a skill that has made him millions. Part of this is…
- Talk to rich people to learn what to do when it comes to money, and talk to poor people to learn what not to do. For example, one time in the tax office Kiyosaki met a woman who invested in tax lien certificates and invited her to lunch, she was more than happy to talk.
- Pay yourself first by always putting money into assets and keeping consumer debt low. Don’t spend income on luxuries, but only the passive income from investments.
- Pay advisors well because they should be making you money, and make sure they invest themselves in stocks or real estate.
- Ask how long it will take to get your money back before investing in an opportunity. Kiyosaki makes lots of offers for properties, thinking of it like a fun game. In case he doesn’t want to make the deal later, he includes a clause that the offer is subject to approval of his business partner, secretly his cat. Shop for investments during market crashes/corrections because that’s when everything is on sale.
- Think what would a successful investor do in this situation, like Warren Buffett or Donald Trump or George Soros. When looking for properties, Kiyosaki often researches the area in-person by jogging or driving through for a year, looking for important signs of upward growth, like new retailers moving into the area.
- To receive, first give, whether it’s money or a smile.
A classic self-help book that continues to be very popular is Think and Grow Rich by Napoleon Hill, who studied 500 millionaires to discover common patterns in their mindset that made them wealthy. The book is really about harnessing our desires, focusing on a specific goal, and overcoming fears of failure and self-doubt. Here’s a great quote: “Wishing will not bring riches. But desiring riches with a state of mind that becomes an obsession, then planning definite ways and means to acquire riches, and backing those plans with persistence which does not recognise failure, will bring riches.”
How do the rich have money work for them according to Robert Kiyosaki in "Rich Dad Poor Dad"?
By working extra hours
By investing in assets
By saving in a bank
By spending on luxury
Now, let’s move on to a deep dive into the best practical ideas and key takeaways in this book…
💡 1. Financial Literacy is Key: Understand how money works, and learn about assets, liabilities, and investing to manage and grow wealth
Financial literacy is the key to breaking the cycle of financial struggle and building a secure financial future. Most people are not taught about money in school, leaving them to learn financial habits from their parents. A significant failure of our education system is its lack of basic financial education.
Let’s talk about why financial literacy is so crucial. Think about how often you’ve heard people say they wish they had learned more about managing money in school. Most of us aren’t taught about finances growing up, and the little we do learn comes from watching our parents. This means if your parents struggled with money, there’s a good chance you might too unless you make a conscious effort to break the cycle.
Robert Kiyosaki was fortunate to have two father figures with very different views on money. His biological father, whom he calls “Poor Dad,” believed in getting a good education and working your way up the corporate ladder. Job security and benefits were his top priorities. In contrast, his “Rich Dad,” the father of his best friend, believed in educating yourself about finance and the importance of making money work for you. Rich Dad’s philosophy was that the traditional approach to earning money would never lead to real wealth.
One of the biggest lessons from “Rich Dad Poor Dad” is that simply earning more money won’t solve your financial problems. This is evident when you look at lottery winners who go broke a few years after their big win. For most people, more money usually means more spending and more debt, not more financial security. Most of us are so focused on how to increase income, not realizing that higher income people are generally stuck in the same trap as the rest of us, with a slightly nicer house and car or other toys.
True wealth isn’t about having a high income or owning expensive things. It’s about how long you can maintain your lifestyle without having to work. For Kiyosaki, the goal was to build enough assets that his money could keep growing even if he decided to stop working. He was able to retire at 47, not because he had a high-paying job, but because he focused on building and acquiring assets that generated income. That bought him freedom.
A great book called “The Millionaire Next Door” explores the reality of millionaires in America, and it’s quite different from the common stereotype of flashy sports cars and huge mansions. The typical millionaire is often a blue-collar business owner who drives a regular Toyota or Ford and doesn’t stand out. They could easily be your next-door neighbor.
The authors explain that: “Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier. You are just living high. Wealth is what you accumulate, not what you spend.” This is why many high-income professionals like doctors and lawyers often have relatively low net worths. They feel pressured to display their success with luxury cars, vacations, and expensive homes, which hinders their ability to accumulate real wealth.
What does Kiyosaki identify as a key reason for most people's financial struggles?
Lack of financial education
Lack of job opportunities
Lack of adequate income
Lack of self-discipline
📊 2. Assets vs. Liabilities: Focus on creating passive income through investments and businesses rather than relying solely on a paycheck.
Rich people focus on buying assets that generate income instead of working more hours for a paycheck. An asset is anything that puts money in your pocket, while a liability takes money out. Examples of good assets include stocks, bonds, income-generating real estate, businesses that don’t need your presence, and intellectual property like books and music.
Let’s dive into why the rich don’t just work for money but make their money work for them. This is a fundamental difference between the wealthy and everyone else.
The rich focus on buying assets—things that generate income over time. Think of assets as anything that puts money into your pocket. For instance, owning a rental property can provide you with a steady stream of income each month.
Contrast this with liabilities, which take money out of your pocket. These are things like cars, personal homes, and credit card debt. A car, for example, costs money to maintain and depreciates in value over time, making it a liability rather than an asset.
One common misconception, according to Kiyosaki, is viewing your house as an asset. While it may appreciate in value, your house doesn’t generate income unless you sell it or rent part of it out. Many people buy the most expensive home they can afford, leaving little room to invest in true assets. This approach can trap you in the Rat Race—constantly working to pay off debt rather than building wealth.
Interestingly, you don’t need to start your own business to build wealth. In fact, this author does not recommend you start a company unless you really really want to, because the vast majority fail. Kiyosaki himself began investing in real estate while working at Xerox as a salesperson. By working hard, living frugally, and smartly investing his savings, within a few years he was earning more from his investments than his salary. Then he used that income from investments to buy things he wanted, like a Porsche and nice home.
What is the most important way the rich manage their money differently?
Avoid spending money
Work harder than most
Start a profitable business
Invest to generate income
🎓 3. Work to Learn, Not Just for Money: Choose jobs that provide skill development and learning experiences, not just a good paycheck
Many people view work only as a means to earn money, but it’s also a great opportunity to acquire important skills and knowledge. Rich Dad believed in the long-term benefits of working a variety of jobs, while Poor Dad believed in securing a stable, high-paying job. Kiyosaki worked on a ship to learn trade, in the Marines to learn leadership, and at Xerox to learn sales, all of which eventually proved useful as an entrepreneur.
Let’s talk about why it’s crucial to work for learning and not just for money. Imagine you have two choices: one job pays well but offers little room for growth or learning, while the other job pays less but teaches you valuable skills. Which would you choose? Many would go for the higher-paying job, but Kiyosaki’s Rich Dad would advise otherwise.
Rich Dad believed in using work as a tool for education. He taught Kiyosaki that real-world experiences are invaluable. For instance, when Kiyosaki worked at a small supermarket for Rich Dad, he had to give up his beloved softball games and earned very little money, eventually working for free. However, this experience wasn’t about the money; it was about understanding what work is like for most people and learning the basics of running a business.
Kiyosaki’s career path further illustrates this philosophy. He started at Standard Oil to learn about international trade, then joined the Marines to develop leadership skills. The most important skills, according to Kiyosaki, are sales and marketing. No matter what field you’re in, you’ll need to sell something, whether it’s a product, an idea, or yourself. Kiyosaki overcame his natural shyness by working at Xerox, where he became one of their top salespeople. This experience was essential when he later started his own business.
One memorable example is when a talented writer asked Kiyosaki how to improve her book sales and he advised taking a sales course. She was initially offended, thinking sales was beneath her. However, Kiyosaki pointed out that he was a “best-selling author” not a “best-writing author”—that required knowing how to sell. For example, his first book was titled “If you want to be rich and happy, don’t go to school,” a somewhat obnoxious title that gets people talking and interested, even though Kiyosaki is not actually against education. The title his editor recommended was “The Economics of Education” which would have sold approximately zero copies.
In “The Psychology of Selling,” Brian Tracy discusses the concept of the winning edge. This principle states that “small differences in ability can lead to enormous differences in results.” In business, the top 10% of earners might only be slightly better than everyone else, but this small advantage is all they need to succeed.
It’s just like in a sports race where the winner does not need to be 10X faster than everyone else; they only need to be faster by a fraction of a second. Similarly, a top salesperson in a competitive market often causes most customers to choose them over their competitors simply by making a few minor adjustments, such as sending personalized follow-up messages to potential clients after a meeting.
Read our summary of The Psychology of Selling by Brian Tracy
According to Kiyosaki, what are the most important skills to study for career success?
Financial planning and accounting
Sales and marketing
Leadership and management
Engineering and technology
🏢 4. Use Corporations: How the Rich use corporate structures to minimize taxes and protect wealth
Corporations offer significant tax benefits and protections, such as allowing expenses to be deducted before taxes are paid and shielding personal assets from lawsuits. Additionally, strategies like the 1031 tax-deferred exchange in real estate enable investors to grow their investments faster by deferring capital gains taxes.
Let’s explore why the rich often use corporations to manage their finances. When taxes were first introduced, they primarily targeted the wealthy. Over time, as government spending increased, taxes expanded to include the middle class. However, the rich found ways to minimize their tax burden legally. In fact, many of these beneficial tax laws exist because governments want to incentivize business owners and investors to create more jobs housing. So who ends up paying the highest percentage in taxes are highly paid professionals, like doctors and lawyers.
One of the most effective methods is through corporate structures. Unlike regular employees who must pay taxes before covering their expenses, corporations can deduct their expenses first and then pay taxes on the remaining income. This allows businesses to reinvest more money into their operations and grow their assets more quickly. (However, it’s worth noting that in some cases, corporations can lead to double taxation, where both corporate income and personal income are taxed.)
Corporations also offer protection. If you’re sued, your personal assets, like your home, are safeguarded. This legal separation can be crucial in preserving your wealth. Robert Kiyosaki recommends Garrett Sutton’s books to learn more about setting up your own personal corporations.
Robert Kiyosaki emphasizes the importance of understanding these benefits. For instance, he often starts with a small property and gradually trades up to larger properties. In the U.S., using a 1031 tax-deferred exchange, you can sell a property and reinvest the proceeds into a new property without paying capital gains tax immediately. This strategy allows investors to grow their real estate portfolios more efficiently.
Here’s a practical example from Kiyosaki’s life. In 1989, he bought a small house in Portland, Oregon, for $45,000 with a $5,000 down payment. After renting it out for a year, he sold it for $95,000, moving the $40,000 profit into a 1031 exchange. This allowed him to buy a larger 12-unit apartment building. A few years later, he traded up to a 30-unit apartment in Phoenix, Arizona, eventually selling it for $1.2 million. This process of trading up properties without paying immediate capital gains taxes enabled Kiyosaki to grow his investments significantly faster.
If you want to be successful, then a great role model to look at is Arnold Schwarzenegger. He grew up in a small Austrian town, became the world’s greatest bodybuilding, then a top Hollywood action star, and even the Governor of California. While most of us know about Arnold’s strong work ethic, few people are aware of his business smarts.
Before becoming a famous movie star, Arnold Schwarzenegger had already become a millionaire through real estate. You see, while everyone around him was trying to buy a house, Arnold thought differently. He bought a 6-unit apartment building for a similar downpayment as a house. Then he lived in the nicest unit and rented out the others, which paid his entire monthly mortgage. This is a perfect example of putting money into an asset that generates income.
Why do the rich use corporations according to Kiyosaki?
Eliminate all taxes
Increase personal spending
Avoid paying expenses
Reduce and defer taxes
💪 5. Overcome Fear and Self-Doubt: Develop a mindset that embraces risk and learns from failures to grow your wealth
People often avoid taking financial risks due to fear of losing money. However, even successful investors like Warren Buffet experience losses. Instead of listening to perpetual naysayers, focus on making informed decisions and seizing opportunities, especially during market downturns.
Let’s dive into why overcoming fear and doubt is essential for financial growth. Have you ever known you should do something but didn’t do it because of fear? We all have internal blocks that stop us from becoming wealthy, even after we become financially educated. These blocks include fear, arrogance, laziness, bad habits, and cynicism.
The first major obstacle is fear. Many people are afraid to lose money. But the reality is that even the best investors, like Warren Buffett, face losses. Nobody likes losing money, but it’s a natural part of the investing process. Successful investors understand this.
Don’t let fear dictate your investment decisions. News outlets often amplify fear because it captures attention. Instead, look at what successful investors do—they often buy when everyone else is scared. For instance, during a market downturn, property and stock prices drop, creating prime buying opportunities for experienced investors, who view the situation more as an opportunity than a catastrophe. Kiyosaki believes that in real estate, you make a profit based more on the price you buy at than the price you sell at. His strategy relies heavily on looking for great deals, often during market crashes and corrections.
Laziness is another hurdle. The cure for laziness, according to Kiyosaki, is a little greed. Instead of saying, “I can’t afford it,” ask, “How can I afford it?” This question sparks motivation and creativity.
Another significant obstacle is arrogance. This is the mindset that what you don’t know doesn’t matter. It’s about being closed to learning new things or changing your opinions. Arrogance can be costly. Rich Dad said arrogance always cost him money, so it’s crucial to stay humble and continuously seek knowledge and advice.
For example, Kiyosaki invested in a real estate course early in his career, which cost him $385. This course taught him strategies about how to buy property for no money down that eventually made him millions. Many people start investing without proper education, leading to costly mistakes.
Paying yourself first is a practical application of this mindset. Set aside a portion of your income for investments before paying any other bills. This may be the most controversial part of Rich Dad’s teachings, because most financial advisors and accountants would find it crazy not to pay creditors first. However, Rich Dad said this creates a pressure that motivated him to find ways to generate more income, much like physical stress at the gym makes someone stronger.
Avoiding consumer debt is also crucial. High debt levels make it hard to save and invest. By keeping your expenses low and avoiding unnecessary debt, you can more easily accumulate money to buy assets. Over time, the income from these assets can fund your lifestyle and purchases, providing financial freedom.
According to Kiyosaki, what strategy should investors use during a market downturn?
Buy when prices drop
Wait for the market to recover
Avoid buying assets
Sell all existing investments
- Track your spending: Use a budgeting app to categorize expenses, such as YNAB (short for You Need A Budget). This step alone can increase your financial literacy through self-awareness. If you want to get your money under control, see Your Money or Your Life.
- Reduce liabilities: Pay off high-interest credit card debt quickly. This step should come before investing because credit card interest will cost you 20% per year—that’s more than what you’re reasonably likely to earn investing. If you want to pay of debt fast, see The Total Money Makeover by Dave Ramsay.
- Invest in assets: Open a brokerage account and buy your first stock or ETF. Many leading finance books would recommend buying an index fund, which is like a collection of all the stocks. If you want to learn investing for retirement, see The Simple Path to Wealth.
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