To put in simple terms, it's why the rich get richer and the poor get poorer. Suppose two people were each given a thousand dollars. Person A is financially literate, and Person B isn't. Person A will spend his/her thousand dollars on something that will grow in value, such as stocks, bonds, mutual funds, or use that money as seed capital to make an idea become reality. Person B will most likely spend his/her money on something that they've always wanted, even if it does not mean that they will become richer in the future. The concept here is that the rich spend their time and money acquiring assets that will grow in value. They can enjoy all of life's pleasures once passive income exceeds expenses, while the poor continue to work for the rest of their lives trying to pay off all of the bills that they've accumulated by not watching their spending on life's pleasures.