‘Rich Dad Poor Dad’ author and influential – if controversial – entrepreneur Robert Kiyosaki. (Pinterest pic)
“Savers are losers.” This is quote attributed to Robert Kiyosaki, the bestselling author of “Rich Dad Poor Dad”. And, like many provoking thoughts, it sparked a debate among personal-finance enthusiasts.
After all, it is conventional wisdom to save money. So, what is the context behind Kiyosaki’s statement?
According to his book, the money that we work hard for and save is actually “fiat currency” that derives its value from supply and demand and the stability of the issuing government. Currencies such as dollars, yen, pound sterling and ringgit can be created limitlessly; with increasing supply, their value – i.e. purchasing power – falls over time.
Hence, in his view, to work hard and save currencies for the long-term is like building sandcastles. Kiyosaki prefers to convert his currencies into assets that are income-productive and are at least able to hold their value over time.
Kiyosaki’s focus is on long-term purchasing power. As a highly skilled entrepreneur and investor, he could borrow millions (in currencies that fall in value over time) to invest in high-quality assets (such as real estate, which generates solid cash flow and appreciates in value over time). This is financial mastery.
That said, it remains financially responsible to save for a rainy day. It is great to have a sizable stash to meet unexpected life emergencies, or if we wish to treat ourselves to a vacation or pursue projects that are meaningful to us.
The focus here is more on short-term liquidity. There is freedom and security in having ample savings in our bank accounts. From this perspective, how can savers be losers?
Ultimately, one can appreciate the context of Kiyosaki’s statement by keeping in mind that balance is the key. It’s not practical to be extreme on either end.
If you invest too aggressively, you risk not having enough in times of emergency, which puts you in the position of having to sell off assets forcefully to pay for short-term bills. It would be advisable to build up your cash reserves to serve you in times of need.
If you are into cash hoarding, you are not optimising your capital effectively to grow your wealth. It’s wiser to overcome your fear of loss, gain investment experience, and reap greater returns at lower risk, which is a skill that is liberating and could serve you for life.
This article first appeared in KCLau.com.
Ian Tai is a financial content writer, dividend investor, and author of many articles on finance featured on KCLau.com in Malaysia, and ‘Fifth Person’, ‘Value Invest Asia’ and ‘Small Cap Asia’ in Singapore.