Robert Kiyosaki: Why Saving in Cash Is a Bad Idea

In the world of finance, few voices are as influential as Robert Kiyosaki, the author of "Rich Dad Poor Dad." Known for his unconventional wisdom, Kiyosaki has long warned against the dangers of saving money in cash. His perspective, while controversial, is rooted in a deep understanding of inflation and its impact on wealth. Let's delve into why Kiyosaki believes saving in cash is a bad idea and explore the alternatives he recommends.



The Dangers of Saving in Cash

Kiyosaki's primary concern with saving in cash is inflation. He refers to government-issued currency as "fake money" because its value diminishes over time due to inflation. This erosion of purchasing power is what Kiyosaki calls "government theft," as it reduces people's ability to buy goods and services while enriching the wealthy.

Historically, the impact of inflation is evident. For instance, the national average cost of a movie ticket in 2005 was $6.41, but by 2019, it had risen to $9.16, and by 2022, it was $16.29. This significant increase illustrates how inflation can erode the purchasing power of cash savings over time. Kiyosaki advises against relying too much on fiat money and instead recommends investing in real assets like gold, silver, and Bitcoin to protect wealth in the long run.

The Case for Real Assets

Kiyosaki's strategy involves investing in assets that do not lose value over time. He specifically advises, "I want you to grow richer… not poorer. Please start working for and saving gold, silver, and Bitcoin." He has recently highlighted silver as a particularly strong investment, predicting that it could hit $70 this year and even $200 in the next couple of years. He tweeted, "Silver for the next two months is the best of the three, gold, silver, and Bitcoin."

Historically, precious metals like gold and silver have been effective hedges against inflation. For example, during periods of high inflation, such as the 1970s, gold prices surged as investors sought to protect their wealth. Similarly, Bitcoin, with its limited supply of 21 million coins, has been seen as a hedge against inflation because it is designed to be scarce, unlike fiat currency which can be printed endlessly. Kiyosaki's advice to invest in these assets aligns with the historical performance of these investments during inflationary periods.

The Risks and Benefits of Following Kiyosaki's Recommendations

The potential risks of following Kiyosaki's recommendations include the volatility and unpredictability of the markets for gold, silver, and Bitcoin. For instance, while Kiyosaki believes that silver could hit $70 this year and even $200 in the next couple of years, the actual price of silver can fluctuate significantly due to market conditions. Similarly, Bitcoin's value can be highly volatile, with sharp price swings that can result in substantial gains or losses for investors. Additionally, investing in these assets requires a certain level of financial literacy and risk tolerance, which may not be suitable for all investors.

On the other hand, the potential benefits of following Kiyosaki's recommendations include the possibility of hedging against inflation and preserving the value of one's wealth. Real assets like gold, silver, and Bitcoin are often seen as safe havens during times of economic uncertainty and can provide a hedge against inflation. For example, Kiyosaki believes that Bitcoin's limited supply makes it a great hedge against inflation, as it is designed to be scarce—something investors see as a big advantage. Furthermore, investing in these assets can potentially generate significant returns, as seen in the past performance of gold, silver, and Bitcoin. For instance, from 1972 to 2019, REITs, on average, returned an 11.8% total annual return compared to the S&P's 10.6%, demonstrating the potential for real estate investments to outperform traditional stock market investments.

Conclusion

Robert Kiyosaki's perspective on saving in cash is a stark reminder of the dangers of inflation. While traditional financial advice often encourages saving in cash, Kiyosaki's unconventional wisdom offers a different path. By investing in real assets like gold, silver, and Bitcoin, investors can potentially hedge against inflation and preserve their wealth. However, it's essential to understand the risks and benefits of these investments and to approach them with caution. As Kiyosaki himself advises, "It’s still not too late to invest, especially in silver. Almost everyone in the world can afford at least 1 silver coin today… but not tomorrow."

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