Rich dad poor dad chapter 5 summary (lesson 5 – the rich invent money)

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In Chapter 5 of Rich Dad Poor Dad, author Robert Kiyosaki outlines his fifth lesson – “The Rich Invent Money.”

This chapter focuses on understanding how the rich utilize corporations, tax law, and asset protection strategies to legally minimize taxes and multiply wealth.

Kiyosaki argues that the rich focus on building assets that generate cash flow, rather than simply earning a paycheck.

By owning businesses and investments that provide residual income, the wealthy are able to invent new sources of money that continue paying out over time.

This rich dad poor dad chapter 5 summary provides insight into how the rich strategically use corporate structures and tax strategies to their advantage when building sustainable wealth.

In this blog post, I’ll discuss Key points, analysis, review, quotes, important lessons, and the summary of rich dad poor dad chapter 5.

Rich dad poor dad chapter 5 summary

Rich dad poor dad summary chapter 5 Lesson 5 – The Rich Invent Money.

The key lesson of rich dad poor dad chapter 5 is that the rich have the power to invent money through financial intelligence and creativity. They don’t simply work hard and get paid – they use money to make more money. 

In chapter 5 Robert kiyosaki shares about a financial planner forecasting doom and gloom on TV, advising people to save $100 a month for 40 years to be a millionaire.

Robert Kiyosaki scoffed at this slow approach. With the economy in Phoenix depressed in the early 1990s, Robert was buying up cheap properties for $20-30k that were once worth $75-100k.

He’d quickly resell them for $60k with no money down to eager buyers. The $40k gain was invented money he could now use to invest and pay no taxes on. 

This is what Robert’s rich dad meant when he said “the rich invent money.” They don’t sit back and work hard to earn money that’s heavily taxed. They use financial intelligence to create money opportunities through investing and leverage. 

Rich Dad taught Robert from age 9 that he needed to use his mind to make money work for him through owning assets and starting businesses.

Rich Dad explained: 

“The rich do not work for money. They make their money work for them through assets that provide passive income whether they work or not.”

When Robert was a teenager, Rich Dad further explained: 

“Poor and middle class people have to work for money. The rich focus on making money. The key is having your money work hard for you instead of you working hard for money.”

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Rich Dad went on:

“The rich invent new forms of money like royalties, rents, dividends, capital gains. They don’t have to work because their assets keep generating income. They make their money work hard through leveraging OPM – other people’s money.”

When Robert asked “How do I invent new money?” Rich Dad replied:

“You need to expand your financial intelligence first. Study money – how it works, how to make it grow. Use your financial knowledge to invent new streams of income through owning assets.”

In contrast, Poor Dad advised playing it safe within proven systems and avoiding unnecessary risk. He told Robert: 

“Stick to solid companies and climb the corporate ladder slowly. Don’t take chances with risky, fly-by-night investments you don’t understand.”

Poor Dad only saw money as something to be earned through diligent work, not as a resource that could work for you.

By high school, Robert observed that his poor dad classmates had resigned themselves to a fate of trading time for money their whole lives. They could only envision getting a secure job after college. 

The few entrepreneurial students seemed bored in class but came alive when discussing their own projects. They saw a world of opportunity beyond just getting a job.

Robert reflects that the education system teaches you how to work for money, not how to have money work for you. Schools do not provide much financial intelligence training. They churn out capable employees but not business owners.

As college graduation approached, Poor Dad kept pushing Robert to get a corporate job to minimize risk. But Rich Dad advised Robert to start his own business someday and take control of his financial destiny.

After college, Robert launched a company providing nautical supplies to ships and oil rigs. The business struggled in its first few years. But with persistence it became highly successful and incorporated. 

Even as Robert’s assets and income grew, Poor Dad kept warning: 

“Don’t take unnecessary risks at this stage. Stick to the corporate path for stability.”

But Robert realized he could achieve greater freedom and wealth by owning income-producing assets rather than just trading his time for money.

By age 30, Robert was making far more money from his business ownership than his corporate job friends. He was on his way to financial freedom thanks to assets.

Robert explains the four main areas of financial intelligence: accounting, investing, markets, and law.

Also read: Rich Dad Poor Dad Chapter 1 Summary (Lesson 1: The Rich Don’t Work For Money)

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You need accounting skills to read financial statements. Investing provides the strategies to make money grow. Understanding markets helps you analyze supply and demand – like how 

Alexander Graham Bell gave the market what it wanted. And legal knowledge helps you incorporate entities to protect assets.

This financial intelligence allows you to spot opportunities like depressed real estate markets to invent and protect wealth.

Alternatively, you can simply work hard at a safe job for earned money that’s taxed heavily before you ever see it.

Robert challenges us not to be afraid of risk. Those who avoid failure also avoid success. Winners are not afraid of losing, while losers are paralyzed by fear.

We must have fun developing our financial IQ over a lifetime because the world is constantly changing. Rather than dread change, we can welcome it and prosper greatly. 

Robert started small, turning $5-10k investments into over a million through real estate and stocks.

He emphasizes the need to plant seeds in your asset column consistently. As your foundation grows, you can take bigger risks if you choose. Building your financial knowledge improves your odds of inventing money from market lemons.

This is what the rich do that the middle class does not. They leverage financial intelligence, law and accounting to their advantage.

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The asset column buys them luxuries likePorsches with pre-tax dollars. The key is to mind your own business – start your own corporation and make money work hard for you.

Robert encourages us not to play it safe but to be bold. Develop your financial IQ because the odds are in your favor, not against.

While the middle class works hard and then pays taxes on what’s left, the rich use corporations and investments to earn, spend pre-tax and reduce taxable income.

If you want to win financially, you must learn how money works and invent new ways of acquiring it. Instead of fearing change, welcome it and prosper.

The blogger hopes this summary provides some motivation to readers. Don’t just work for earned money. Learn to have your money work for you through financial intelligence. 

Regardless of your age or education, you can increase your financial IQ and start inventing money. As Robert’s rich dad taught him, the only real asset we all have is our mind.

Train it well, be bold, take risks and start your journey to financial freedom today.

Robert credits Rich Dad’s lessons for his success in making money work hard for him. Education trains you to be an employee, but real financial freedom requires creating your own assets and income streams.

Also read: Rich Dad Poor Dad Chapter 2 Summary (Lesson 2: Why Teach Financial Literacy?)

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Rich dad poor dad lesson 5 (review)

Here is the Rich Dad Poor Dad Lesson 5 Summary  – The Rich Invent Money: key points and analysis

Introduction

In Chapter 5 of Rich Dad Poor Dad, Robert Kiyosaki continues teaching readers about financial intelligence and how “the rich invent money.” 

Rich dad poor dad lesson 5: “The rich focus on acquiring assets that generate cash flow rather than liabilities. They make money work for them through owning businesses, royalties, stocks, and real estate rather than simply earning a paycheck.”

“It is this basic foundation, or the combination of these skills, that is needed to be successful in the pursuit of wealth.” 

Kiyosaki aims to show how the financially intelligent utilize their skills to create wealth even when they start small.

Developing financial intelligence allows one to spot opportunities and turn lemons into millions.

Main Points

1. The bold and daring find opportunities that others miss

– Kiyosaki argues success often goes to the bold, not just the smart

– Self-doubt holds many back from opportunities right in front of them 

– Overcoming fear and boldly seizing chances is key to wealth  

2. Money is an idea agreed upon by society

– Wealth is created by financial agreements like trading stocks or money flows in businesses

– Kiyosaki’s rich dad taught money is not real; it’s an agreement

3. Financial intelligence allows you to make money from nothing  

– With financial skills like accounting and investing, you can create money through deals

– Kiyosaki gives examples of creating thousands through simple real estate transactions

4. Financial intelligence expands your opportunities

– The more financial aptitude you have, the more deals and options you see

– Knowledge lowers risk and allows you to spot opportunities others miss

5. Start small and build your assets through financial intelligence

– Wealth is built by continuously expanding assets through small investments

– Financial skills let you turn small deals into bigger and bigger sums  

Also read: Rich Dad Poor Dad Chapter 3 Summary (Lesson 3 – Mind Your Own Business)

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Key Supporting Evidence

– Kiyosaki shares how he created $190,000 in assets from small real estate deals, demonstrating making money from little starting capital.

– He provides numerical examples of turning $5,000 investments into over $1 million through savvy stock picks, showing the power of financial intelligence.

– Kiyosaki argues that while some call his investing examples risky, they are only high-risk if you lack financial skills and knowledge. With intelligence, the bold can minimize risk.

Conclusions

Kiyosaki concludes that anyone can gain financial freedom by developing financial intelligence.

No matter your start, you can find and seize opportunities. While boldness and daring are important, building wealth really requires applying financial skills to grow assets.

Kiyosaki presents a compelling case through real-world examples that financial intelligence allows creation of wealth.

Analysis  

This chapter clearly contributes to the book’s argument that financial intelligence, not playing it safe, is key to building wealth.

The numerous examples make a persuasive case for Kiyosaki’s philosophy. However, more data beyond Kiyosaki’s own investments would strengthen his claims.

And the counter-perspective that his high-risk deals ruin some people is worth addressing. Still, the overall message that financial skills empower you is important.

Summary

Chapter 5 rich dad poor dad summary

Rich Dad Poor Dad Chapter 5 summarizes the idea that “the rich invent money” by using their financial intelligence.

Kiyosaki argues that mindset, boldness and financial skills allow the creation of wealth from little starting capital.

Through real estate and stock examples, he shows how small investments can become fortunes when leveraged properly.

The chapter makes a compelling case to develop financial IQ in order to spot opportunities, minimize risk, and grow assets.

Also read: Rich Dad Poor Dad Chapter 4 Summary (Lesson 4 – The History Of Taxes And The Power Of Corporations)

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