Financial education has finally been recognised as something that should be taught in schools with the Government announcing that it will be in the national curriculum from 2014.
The big question remains whether it will actually be taught seriously as a subject and in such a way that future generations genuinely are better equipped to handle their finances.
According to Robert Kiyosaki in his book Rich Dad Poor Dad, it is financial literacy that differentiates the poor and middle classes from the wealthy.
Most of us fantasise about becoming ridiculously rich. But how would you actually go about turning that dream into a reality?
Kiyosaki argues that the key thing that separates the rich from the poor and middle class is that they make money work for them rather than working for money.
Wealth in his terms is not purely about the amount of money you have. There are countless examples of people who have made pots of money from the National Lottery, finance, business, music or sport, only to fritter it all away.
The only way money can be turned into sustained wealth is by educating ourselves about finance, primarily from an accounting point of view and splitting everything we buy into assets and liabilities.
Assets like stocks, bonds, property (both bricks and mortar and the intellectual variety) create income whereas liabilities like debt eat into it.
He explains this philosophy using his own personal history and how he learnt it from his friend’s father.
The friend’s father is the rich dad of the book’s title, a man Kiyosaki says had little by way of formal education but plenty in terms of financial cunning and building his business and assets to ensure he and his family were financially secure.
Kiyosaki’s own biological father is the poor dad – highly educated but a slave to his salary and constantly griping about not having enough money.
Rich dad explains to Kiyosaki, who he first meets when he is eight, that banks via interest charges and the Government via taxes all take their cut from the majority of peoples’ income.
The clever people, Rich dad argues, want to get out of this endless cycle and stop being a mere salary slave.
So having made his case about why and how we should become better educated financially through his rich dad poor dad formula, Kiyosaki then gives practical examples of how to achieve long term wealth.
You could easily criticise the book for the fact that the philosophy and views of socialist poor dad fails to get much of an airing compared to the rich dad.
Howeve I found his general philosophy that we need to build up assets that generate income rather liabilities that reduce it persuasive and ditto the bit on financial education.
Discussions about the minutiae of US taxation laws and no-money down property purchases from people foreclosing which are then resold at a profit are potentially not going to be much use in the UK.
That said, he says the most common responses when people hear about his ideas is “you can’t do that here” or “that’s against the law”, so clearly I am falling into line on this one.
Implementing his ideas would be tough, but he makes a compelling case for the benefits to be gained from educating ourselves financially, increasing our assets and making money rather than merely working for it.