Five Money Suggested for Student Athletes With Zero Deals

“Hey, kid, go play a nice game outside and have some fun. The hypothetical father of a kid making zero dollars in 2024 exclaims, “Oh, and don’t forget to send the IRS your quarterly estimated tax check and don’t forget about the social post you owe Vinny’s Pizzeria today.”

In the few years since it became acceptable for college and, in many regions, high school kids to profit from their own personal brands, a large number of gifted individuals have become young entrepreneurs. This idea is known as name, image, and likeness, or NIL. To understand it better, picture a well-known college athlete receiving payment to promote a product or a player peddling autographed items.

Even if the great majority of children don’t have an Arch Manning-like windfall, experts suggest that those with lesser incomes may be more prone to financial mistakes.

Financially astute young stars who aspire to make money off of their brand are essential. Here are 5 things to remember if you’re an athlete.

Carefully Review Contracts

Though it’s understandable that a young athlete could be unduly eager to sign any business agreement that presents itself, Helen Drew, a University of Buffalo professor of practice in sports law, advises caution.

“Student athletes are somewhat at the mercy of the people who would be engaging with them,” she says. “It’s hard to know whether or not the deal is worth taking.”

Drew remembers seeing a deal where the student was requested to grant power of attorney as a condition of the deal. She said, “He [the student] had no idea what that meant.”

A 19- or 20-year-old is probably not thinking about power of attorney documents, which are legal instruments that grant authority to another individual or organization to act on your behalf in specific circumstances.

As stated by Luke Fedlam, a partner and chair of sports law at Porter Wright Morris & Arthur LLP in Columbus, Ohio, “[Student athletes] have to understand a contract before they sign it.”

Draw your parents in, exercise care, and thoroughly investigate the company before signing anything, advises Drew. “It’s probably true if it looks too good to be true.”

If you come across a phrase like “power of attorney,” you might want to get legal advice.

Budgetary Profits That Endure

If and when a credible agreement closes, you will be paid. At that point, you need to start planning for the future.

If you’re not Bronny James, be prepared for irregular deals with inconsistent compensation. Classical financial ideas still hold true for people who are able to make six or seven figures.

Fedlam suggests that young workers make a plan for how to save and spend their money and sit down with a budget.

Adults too need to be instilled with this concept. You’ll be happy you did, though, after you open a spreadsheet and establish some spending boundaries. Save a portion of your income to create an emergency fund. Aim for $500 and increase it from there.

It would be prudent to start thinking about retirement savings right away if your personal brand is generating a steady stream of revenue.

Make Tax Arrangements

Remember the IRS while you look for areas where you might save money.

Boring as it may sound, the benefit of a regular day work is that companies usually deduct taxes from your paycheck, saving you the trouble of doing the math at a later time. With a one-time NIL agreement, that might not be the case.

“Typically in these agreements, the responsibility for paying taxes is passed to the student athlete,” Drew says.

You could have to pay anticipated taxes on a quarterly basis and self-employment tax, depending on your income, to prevent a large bill in April.

Athletes who make more money and have more sources of income might seek an accountant’s assistance.

Set Aside Time For Yourself As Well

There are other methods for athletes to profit from their name, image, and likeness, but according to Bill Carter, creator of Student-Athlete Insights and NIL educator and consultant, social media influencer marketing is the most popular NIL activity. (For instance, Company X pays a student-athlete to promote a product on their social media page.)

Teenagers may find paid posting to be like music, but it may also require more labor than you might imagine.

A panel of 1,000 high school prospects and 5,000 college student athletes participate in Carter’s monthly NIL survey.

An influencer campaign’s social media post as a whole takes, on average, three hours, according to survey data.

The amount of preparation, organization, and communication needed to post on social media for a business may surprise athletes accustomed to sharing their own content without restriction, according to Carter.

Prepare yourself to work hard off the field as well if you’re an athlete who already has a limited amount of free time.

Seek Education

Though they concede that there is still more to be done, experts agree that financial education is crucial for young athletes navigating NIL.

According to Drew, school curricula aren’t always designed for what comes with NIL. She also bemoans the absence of fundamental financial teaching in elementary schools.

“The types of things these kids need are things every adult needs,” she says. “Maybe you don’t need to balance a checkbook anymore. But you should probably have some understanding of what the ramifications of signing any kind of contract are.”

According to Carter, his survey data consistently demonstrates that student athletes who participate in NIL are keen to expand their knowledge in areas like as investing and the fundamentals of credit building.

The good news is that reading credible web sources about investing, credit, saving, and budgeting can help you become more financially literate. If NIL becomes a reality for you, there are more specialized resources like AdvanceNIL.com, which Fedlam co-founded to provide education for athletes and families.

And once you’ve finished playing (and paid posting), the lessons you acquired might position you for future financial success.