COLUMN - Last week I wrote about Robert Kiyosaki's market predictions. This week I want to go back to the book that made him famous.

Rich Dad, Poor Dad is one of the most influential money books ever written. 

I had quite a few replies to last week's article, and it was interesting to see how many people with an interest in personal finance had read it.

I got a copy from my uncle in about 2000, when I was 16. It was absolutely massive at the time, and it will probably be one of the first books I hand to my own kids.

Nearly thirty years later, I thought it would be interesting to go back and revisit some of the book's main ideas. Many of them completely changed the way people thought about money, and several have stood the test of time. 

Others don't translate particularly well to South Africa, and one idea deserves far more credit than Kiyosaki gives it.

What the book gets right

The core idea is simple and powerful. Wealthy people buy assets that put money in their pocket. Everyone else buys things they think are assets but that actually take money out of their pocket every month.

That reframe, thinking about everything you own in terms of cash flow, is worth the price of the book on its own. Start acquiring income-producing assets. Keep acquiring them. Let them fund your life.

Those assets do not have to be property. In fact, this is one place where Kiyosaki unintentionally narrows the conversation. The real principle is not property. It is ownership. Businesses, shares, property, royalties, anything that produces cash flow.

For most people, that means globally diversified share portfolios, accumulated steadily over a working lifetime. If a young person takes only that away from the book, it was worth reading.

Kiyosaki's own prime example is property. Buy real estate with borrowed money, let tenants pay off the bond, use the tax system cleverly along the way. 

Run your affairs through a company, claim legitimate business expenses and use debt efficiently. He even talks about buying the Porsche through the business.

Here is the problem. That playbook was written for America.

The South African reality check

In the US, a buyer could get a mortgage covering the full purchase price, fixed for 30 years, at rates that at times dropped as low as 3%. The debt is cheap, and the rate never moves.

In South Africa, you will battle to get a 100% bond. Your rate is linked to prime, which means it floats, and right now that puts you at around 10% or more. The rate moves against you exactly when times get tough.

Then there is the property market itself. If you had followed the Kiyosaki playbook almost anywhere outside the Western Cape over the past decade, there is a good chance the numbers would have disappointed you. 

Prices in much of the country have gone sideways or backwards, while rates, taxes and levies have climbed by 12% to 15% a year. Your tenant got a home, the municipality got its ever-increasing rates, and you may not have earned the return you expected.

None of this means property is a bad investment. Plenty of people have built real wealth through property, including some of my clients. 

My point is simply that the economics depend enormously on where you buy, what you borrow at, and what you pay. It is a deal-by-deal business, not a universal wealth machine.

Matthew Matthee has a wealth management business that specialises in retirement planning and investments. He writes about financial markets, investments, and investor psychology. He holds a Masters Degree in Economics from Stellenbosch University and a Post Graduate Diploma in Financial Planning from UFS. [email protected]      

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