That relationship is vital to understand. The primary cause of financial struggle is simply not knowing the difference between an asset and a liability. The cause of the confusion is found in the definition of the two words. If you want a lesson in confusion, simply look up the words "asset" and "liability" in the dictionary. Now it may make sense to trained accountants, but to the average person, it may as well be written in Mandarin. You read the words in the definition, but true comprehen- sion is difficult. Why Teach Financial Literacy? 81 So as I said earlier, my rich dad simply told two young boys that "assets put money in your pocket." Nice, simple and usable. "This is the Cash Flow pattern of a liability." Now that assets and liabilities have been defined through pictures, it may be easier to understand my defi- nitions in words. An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket. this is really all you need to know. If you want to be rich, simply spend your life buying assets. If you want to be poor or middle class, spend your life buying liabilities. It's not knowing the difference that causes most of the fi- nancial struggle in the real world. Illiteracy, both in words and numbers, is the foundation of financial struggle. If people are having difficulties finan- 82 Rich Dad, Poor Dad dally, there is something that they cannot read, either in numbers or words. Something is misunderstood. The rich are rich because they are more literate in different areas than people who struggle financially. So if you want to be rich and maintain your wealth, it's important to be finan- cially literate, in words as well as numbers. The arrows in the diagrams represent the flow of cash, or "cash flow." Numbers alone really mean little. Just as words alone mean little. It's the story that counts. In finan- cial reporting, reading numbers is looking for the plot, the story. The story of where the cash is flowing. In 80 percent of most families, the financial story is a story of working hard in an effort to get ahead. Not because they don't make money. But because they spend their lives buying li- abilities instead of assets. For instance, this is the cash flow pattern of a poor per- son, or a young person still at home: Rich Dad, Poor Dad the cash flow pattern of a wealthy person: Interest Rental Income Royalties Expanse Why Teach Financial Literacy? 85 All of these diagrams were obviously oversimplified. Ev- eryone has living expenses, the need for food, shelter and clothing. The diagrams show the flow of cash through a poor, middle class or wealthy person's life. It is the cash flow that tells the story. It is the story of how a person handles their money, what they do after they get the money in their hand. The reason I started with the story of the richest men in America is to illustrate the flaw in the thinking of so many people. The flaw is that money will solve all problems.