Blog | Personal Finance

Rich Dad Scam #1: “Go to a good school.”

Why getting a higher education won’t mean living the good life

There are all sorts of scam artists in the world. Most of the time we can spot them, like those emails that promise us millions if we’ll just give away our bank account numbers. Sometimes we don’t spot them until it’s too late or they make a mistake, like with Bernie Madoff. And sometimes we don’t know we’re being scammed at all because we’re conditioned to think from the cradle that something is the best and right advice for living.

This is the first in a series of posts where I’m going to explore the scams that most people never know about. I call the series Rich Dad Scams. The first one we’ll explore is the age-old platitude of, “Go to a good school.”

The “good school = success” scam

When I was young, my poor dad always told me the best path to success was to go to school. He felt that was the best way to get a good job. After all, it was the path he’d taken. He had multiple advanced degrees and was the superintendent of the Hawaii school system.

The problem was that even though my poor dad was one of the most educated people I knew, he was always complaining about money and how unhappy he was with his work.

My rich dad, on the other hand, didn’t have a college degree. He had to drop out of school in order to help run his family business, which started as a local store. Yet he was very rich and successful, eventually building a real estate empire complete with a hotel on the beach. Rich dad said, “School teaches you to be an employee. If you want to be rich, don’t count on school.”

I took my rich dad’s advice, and from a very young age, I learned that the promise of higher education—going to a good school for success—was one of the biggest scams around. Indeed, my own research on this and reality itself, reflect the truth that higher education is a scam. Don’t believe me? Take a look at this list of 50 extremely successful people that never finished school.

The point, of course, isn’t that going to a good school prevents you from being successful. That’s clearly not true as well. There are many people who become successful after going to good schools. The point is that you don’t need a good school in order to be successful. That’s a myth, and that’s why it is the first Rich Dad Scam I’ve identified in this series.

Going to school doesn’t make you financially smart

Because I’m outspoken against the school system, I’m often accused of being anti-education. Nothing could be further from the truth. But “go to college” is one of those things people point at as a way of being successful without ever stopping to think if it’s true.

Every context must be taken into account. For instance, if it’s my desire to gain a lot of head knowledge and to be a good employee, I can gain those valuable skills and insights with a higher education. However, if it is my desire to learn how to start a business, invest like a pro, and grow my money, I will not learn that in college. It is not the right context for that education. For that I need to find other teachers and mentors. One context gives me books smarts. The other context gives me financial smarts.

My rich dad taught me this when he started playing Monopoly with me and his son. My educated poor dad never had time for games. He always told me, “Go read a book.” I didn’t care to read books, but I did love games. Rich dad turned playing Monopoly into an education opportunity. He passed along the simple formula for wealth: four green houses, one red hotel. This is how I learned the importance of investing in assets and then using the wealth generated from those assets to buy even larger assets. When rich dad taught us this, he didn’t yet have his own hotel, but later in life, following the same formula, he landed one on the beach.

My poor dad didn’t understand the importance of context. He thought we were playing a pointless game. He wanted me to be book smart. That was his context. I wanted to understand money and be rich. That was my context. Rich dad’s education understood my context and gave me the financial education I needed.

The scam that school will make you a success is perpetrated everywhere and all the time. What will make you rich is not going to school and learning book smarts but rather gaining financial smarts—learning how money works and how to make it work for you.

Understanding the value of different types of education

This doesn’t mean that education isn’t important. Again, it comes down to context. Most people need the context of a basic education that you get in the K-12 years. It builds the important foundation all education that comes after. That is an important context. And if you want to be a teacher, a lawyer, or a doctor, then obviously you’re going to need to go to college. I don’t know about you, but I’d never let a surgeon who skipped medical school do a procedure on me, and I wouldn’t rely on a high school grad to represent me in court. I appreciate their context and the education they needed.

What you won’t learn in school is how money works. That takes a different kind of education. The kind of education you need in order to understand how money works is financial education. That comes from places like books, seminars, mentors, and trial and error in the real world. American education teaches us to be employees instead of our own bosses. It makes us workers instead of innovators. That’s a big reason why we call school a Rich Dad Scam. In fact, the rich use school to keep poor people poor.

“But I studied money in college!”

Tom Wheelwright, my Rich Dad Advisor on taxes, went to school to be an accountant and got straight A’s. He will also gladly tell you that he got no practical financial education. He learned what was needed to do a job but not how to successfully manage his own finances. And he went to school to learn about money!

People often say they learned about money in school. You may learn how to balance a checkbook in school, but you won’t learn how money really works…how it can be leveraged to create huge amounts of wealth. That’s not an accident; it’s a scam.

The rich use school to train us to be good employees. We start out being told what to do, and are rewarded for compliance. It’s very easy to transition from a school to a company where you’re told what to do. And that leads us to trust and hand things off to the government and the rich bankers who handle our 401(k). The rich use education to make themselves richer and keep you poor, and when you realize that, it’s not hard to see why it’s one of our Rich Dad Scams.

Even worse, the rich become richer off of selling you the scam of higher education. As debt.org shares, “The costs for a higher education are among the fastest-rising costs in American society today. Since 1980, tuition costs at public universities has risen from $2,119 to $9,410, a jump of 344%. Private college tuition is up from $9,500 in 1980 to $32,410 in 2017, a jump of 241%. By comparison, food and electricity costs have risen about 150% and gasoline prices have risen more than 200% over the same period of time.”

As a result of the skyrocketing costs of higher education, “Student loan debt has soared from $260 billion in 2004 to $1.4 trillion in 2017; average debt jumped from $18,650 to $38,000 over that same period; and the number of people over 60 with student loan debt has quadrupled in the last decade from 700,000 to 2.8 million.”

It is one of the ultimate coups of the rich to create the scam that education is necessary to be successful and rich, drive the costs up for that education, and then profit off the loans they give you to attain that education. What a scam.

Different types of intelligence

I mentioned book smarts earlier. One of the worst things about school is that it recognizes only that one type of intelligence. If you aren’t book smart, you are quickly labeled smart or stupid. As a child, I was not book smart, and I was labeled as such. But I wasn’t stupid. I was just interested in different things (again, context). And I was bored. For instance, no one could tell me when I’d ever use calculus in my real life! Yet, I was told to comply and learn. I was being trained to be an employee.

My rich dad wasn’t book smart either. Yet, he was very smart. He had street smarts, which he traded in for financial smarts…which he used to become very rich. School doesn’t teach you to be street smart or financially smart. I had to learn that from my rich dad. My poor dad thought school was incredibly important, and he was very book smart. But what did it get him? He struggled financially most of his life.

That’s another reason why we label higher education a Rich Dad Scam. The so-called experts tell you that you need it. They tell you it’s important. But it doesn’t actually do anything for you except make you a good employee.

Think for yourself

The people who fall for scams are typically those who are conditioned not to think for themselves. Unfortunately, Rich Dad Scam #1, Go to School, robs us of the independence to think for ourselves, to think like an entrepreneur, an innovator, and an investor. It instead teaches us to be dependent.

You need to learn to speak the language of money to be successful. That takes financial education, which opens up a whole new world, a world where you can succeed on your own terms. Unfortunately, our schools don’t teach that language. They teach you the basics, and then they either teach you a specific trade or skill, or they simply train you to be an employee.

Today, it’s time to start thinking for yourself. Don’t fall for this the scam of higher education. Instead, start your financial education today, and begin your journey to financial freedom.