THERE’S BETTER PLACES FOR YOUR SAVINGS THAN YOUR MATTRESS

Welcome to my second post critiquing Robert Kiyosaki’s posts on Yahoo! Finance. On October 17, 2005 Mr. Kiyosaki titled his article Why Savers Are Losers. Once again a provocative title that a. doesn’t recognize the definition of saving and b. can do more harm than good. But that’s just the title what about the contents of the article.

This article is an example of why I believe you can learn from anyone as long as what they say makes sense. The underlying premise of this article makes sense to me.

Mr. Kiyosaki spends most of the time explaining that once the US abandoned the gold standard the American dollar was nothing more than an IOU. It was no longer backed by a physical piece of gold or silver but by the full faith and credit of the United States. This is certainly true.

What this allows, he says, is for the US to print money at will which he says his rich dad told him “…we are doing...” This is the reason Mr. Kiyosaki gives for inflation. This is where things get a bit confusing for me. Is he saying that there was no such thing as inflation under the gold standard? Because there was. Is he saying the US is printing money without consequence? Because there is no way that would be possible. The market sets restraints.

While Mr. Kiyosaki uses a bunch of words on the gold standard story, what his point boils down to is that inflation saps savings of most if not all of its benefit. This is indeed true but again only if savings doesn’t earn any money of its own like interest. Is Mr. Kiyosaki saying that savings is just money under the mattress? Because even in a savings account interest gives some relief from inflation. It’s certainly not the best choice but it’s better than that mattress. And savings includes my 401k which is invested in stocks and bonds and my savings include stocks and bonds I own outside of any retirement plan. Savings also gives me the flexibility and means to buy what Mr. Kiyosaki calls assets such as my home and rental property.

Mr. Kiyosaki gives prices of commodities over a very short period of time to demonstrate the evils of inflation. “Between 2000 and 2005 housing prices went through the roof. Oil went from $10 a barrel in 1997 to over $60 a barrel in 2005. Gold went from $275 an ounce in 1996 to over $475 an ounce in 2005.”

So? What’s that mean? Gold is still far below the 1980 high of $850. Does that mean that inflation was negative, that we can afford more now than in 1980? Oil was a heck of a lot higher in the 1970s so does that mean that between then and 1997 inflation was ticking backwards? And what about the increase in earnings over the years. I’m not saying it’s as easy to afford a house today as it was 5 years ago but only showing the increase in prices without showing the increase in buying power doesn’t give the reader the complete picture.

I said earlier that I actually agreed with and liked this article but so far I’ve only given reasons why it isn’t complete or accurate. That’s the problem with Robert Kiyosaki. He’s such a true believer in his methods that he glosses over the real argument.

If he wants to make the point that inflation nibbles away at savings and that investments in tangible assets is the better course then just say it. There are plenty of good arguments for this way of thinking.

If Mr. Kiyosaki’s article prompts you to think about different options for your savings other than your mattress, the bank, or stocks then he’s done a good job. Of course he could have done it with a better title such as “There’s Better Places For Your Savings Than Your Mattress.”