Best Financial Literacy Books
(Updated 2024)
December 15, 2021Most people work hard for their money – but very few know how to make their money work for them and build wealth over the long term.
In this article, I'll introduce you to the best books on personal finance, money management, and wealth building through short reviews.
Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
by Robert T. Kiyosaki
Robert Kiyosaki tells the story of two fathers – his own, a successful upper-middle-class teacher with several university degrees and a good income (but equally high expenses) – and the father of his best friend, who dropped out of school in the 8th grade and became one of the richest men in Hawaii.
Both men shaped the author in his childhood and youth with entirely different views on money. Based on these views, Robert explains clearly why “poor” people remain “poor”, and the rich get richer and richer.
Most people think and act like Robert's “poor” father: A good education leads to a good job – and this results in a reasonable, regularly rising salary. But this leads them to what Robert calls the “rat race”: the constant cycle of more salary and equally increased expenses.
Robert's rich father, on the other hand, invests his money (initially also earned through employment) in assets such as real estate and securities, giving him financial independence: He makes his living from the money that these assets regularly generate, such as rents and dividends. He only affords luxury goods when his assets have earned the capital required to buy them.
The book does not contain insider tips on how to invest in real estate or stocks; it will not make you rich overnight. But the author gives food for thought and shows ways in the appropriate directions. In particular, he recommends investing in your financial education in the form of business books and courses.
The book is easy to read and understand, and thanks to the many anecdotes from the author's life, it is very entertaining.
Suitable as an audiobook? Yes.
The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness
by Morgan Housel
In “The Psychology of Money,” author Morgan Housel shares valuable advice for personal financial success in 20 loosely connected, mostly real-life stories.
He defines financial success not as achieving above-average returns and owning expensive luxury goods but as building wealth over the long term with a personal strategy that lets us sleep well at night.
The decisive factors for this strategy are primarily not technical aspects and specialist knowledge, but rather an understanding of ourselves, our attitude, and our emotions - such as awareness of our goals, what risks we are willing to take, and how we deal with stressful situations.
Each chapter addresses a different aspect and provides tangible recommendations. These include, for example, a long-term investment strategy and patience, awareness of appropriate returns, luck and risk, room for error (so as not to be forced to take ruinous steps in the event of setbacks), and self-confidence (so as not to be led astray by self-proclaimed financial gurus).
Thanks to the loosely connected and relatively short chapters, the book is a very enjoyable read.
It stands alongside financial classics such as Benjamin Graham's “The Intelligent Investor” and John C. Bogle's “The Little Book of Common Sense Investing” but tells much more contemporary stories and is significantly easier to read.
I recommend it to anyone who wants to build wealth and sleep well while doing it.
Suitable as an audiobook? Yes.
The Intelligent Investor Rev Ed.: The Definitive Book on Value Investing
by Benjamin Graham
“The Intelligent Investor” is the classic book on “value investing,” long-term, analytical investing in undervalued growth stocks, and resisting the lure of short-term market trends. In other words: the strategy Warren Buffet (a student of Graham's at the time) used to build a fortune of more than $100 billion.
Particularly memorable is the allegory of Mr. Market, a trading representative who knocks on investors' doors day after day, offering to buy or sell shares in companies at sometimes plausible but often irrational prices.
Investors should be aware that the prices quoted by Mr. Market often do not reflect the real value of a company based on its fundamentals. Accordingly, one should not let Mr. Market drive one crazy, rather ignore him in most cases and move on. Because there's one thing that you can always count on: that he'll be back at the door the next day.
Graham published the first edition of his work in 1949 and has updated both stock market statistics and mathematical formulas for selecting undervalued stocks every five to six years – most recently in 1973.
While the basic principles of value investing are still relevant today, identifying undervalued companies is no longer something that simple formulas can model in the age of efficient, globally connected markets.
The current edition was updated in 2003 – when investors rediscovered value investing after the .com bubble burst – by financial journalist Jason Zweig to include easy-to-understand chapter summaries and facts and examples from today.
Despite its age, “The Intelligent Investor” is a foundational work that advanced investors should have read. For those new to the stock market, I would first recommend “The Psychology of Money”, published in 2021, which covers a similar range of topics but is written in a much simpler manner and is much more up-to-date.
Suitable as an audiobook? Due to the many numbers and statistics, I would recommend it more companionly to the printed book.
The Richest Man in Babylon
by Goerge S. Clason
The Richest Man of Babylon is a collection of captivating stories set in ancient Babylon about building wealth and achieving financial independence.
The fascinating thing about this 1926 classic is that the basic principles for financial success are the same as they are today:
- Invest a portion of your income and reinvest the profits generated from it.
- Let the compound interest effect work for you.
- Only invest in assets that you have researched thoroughly.
- Keep the risk manageable.
- Surround yourself with people you can learn from.
- Be patient and disciplined.
I like the book's narrative style as it makes the core principles of building wealth more memorable than a purely non-fiction book.
The old-fashioned language takes some getting used to, but the lessons are just as relevant today as they were nearly a hundred years ago when the book was published.
I recommend it to anyone who wants to start building wealth. Readers already familiar with the subject won't learn much new but can still look forward to entertaining stories and a reminder of the core principles of financial independence.
Suitable as an audiobook: yes.
The Millionaire Next Door: The Surprising Secrets of America's Wealthy
by Thomas J. Stanley and William D. Danko
What do most millionaires have in common, and how do you become one of them? To answer these questions, authors Thomas J. Stanley and William D. Danko interviewed numerous millionaires in the U.S. in a study lasting several years, and they came up with some surprising findings, which they published in their world bestseller “The Millionaire Right Next Door.”
According to the study, most millionaires live inconspicuously and modestly in our neighborhood – they drive used mid-range cars, don’t wear fancy clothes, send their children to public schools, and don’t attach any importance to other luxury goods and status symbols.
On the other hand, those people we commonly think of as millionaires – because they live in expensive neighborhoods, drive brand-new luxury cars, live lavish lifestyles, and spark them in their children – have extremely high incomes but usually spend them as fast as they earn them.
While real millionaires do not need to prove to the world how rich they are and instead increase their wealth through diligence, frugality, disciplined financial planning, and wise investments, those who pretend to be millionaires have often taken on heavy debt to finance their extravagant lifestyles.
The authors support their arguments with numerous wide-ranging and exciting case studies. They illustrate them with entertaining juxtapositions between real and fictional millionaires and high earners, revealing insights into their wealth-creating or wealth-destroying habits.
The book is from 1996, and even though the methods of making and spending money have changed somewhat in the Internet age, the book’s basic lessons remain timeless and valuable.
A recommendation for all those who want to build wealth long-term and achieve financial security and independence.
Suitable as an audiobook: yes.
The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns
by John C. Bogle
John C. Bogle is the inventor of index funds and founder of Vanguard, one of the largest asset managers in the world.
In this classic book, he explains what he believes is the easiest and most efficient investment strategy: index funds that track a broad stock market index, such as the S&P 500, and reinvest the dividends.
He uses extensive data to explain why, for private investors, index funds are always the better long-term investment option than individually picked stocks or managed mutual funds.
While index funds have almost no costs, you pay about 2% in annual fees for managed funds. However, almost no mutual fund manages to beat the market by more than 2% over the long term, so the net return is ultimately lower than that of index funds.
When trading individual stocks, few private investors outperform the market over the long term, as many become frantic during setbacks and tend to panic sell.
Therefore, if you prefer to sit back and relax rather than delve deeply into the subject matter, index funds are the best choice for you.
This book teaches you everything there is to know about index funds. The explanations are based on facts and data, are well-structured, and written understandably.
My only criticism: the book could have been a bit more compact. Many topics are unnecessarily stretched out and repeated several times.
Nevertheless, it's a recommendation for anyone who wants to invest their money with little effort and an attractive return.
Suitable as an audiobook? Due to the many numbers and statistics, I would recommend it more companionly to the printed book.