The rise of Name, Image, and Likeness (NIL) opportunities has opened new doors for college athletes to earn income from their personal brand. While these opportunities can provide financial freedom, managing NIL earnings responsibly requires strategic planning and financial education. As a parent, you play a key role in helping your child navigate the complexities of NIL income and ensure that they are prepared for financial success, both now and in the future.
This guide will help you understand the importance of financial planning for NIL, how to manage your child’s earnings, and the best ways to ensure their financial stability.
1. Understanding NIL Earnings
NIL earnings allow student-athletes to profit from their personal brand, including things like endorsements, social media promotions, merchandise sales, and public appearances. While these opportunities can be lucrative, the irregular nature of NIL income can make it difficult for young athletes to manage. That’s why financial planning is essential to ensure that they make the most of their earnings.
Key Income Sources in NIL:
- Endorsement Deals: Partnerships with brands or companies that want to use the athlete’s name, image, or likeness to promote products.
- Social Media Sponsorships: Getting paid for promoting products or services through social media platforms such as Instagram, TikTok, or YouTube.
- Merchandise Sales: Selling branded products, such as apparel or equipment, to fans or through personal websites.
- Appearances and Autograph Sessions: Getting paid to attend events, meet fans, or sign autographs.
2. The Importance of Budgeting and Tracking NIL Income
With NIL earnings, your child may experience fluctuating income, making it important to develop a budget and track income regularly. A structured budgeting system will help your athlete allocate their money appropriately, ensuring they can cover their basic expenses and save for the future.
Steps for Budgeting NIL Income:
- Track All Income Sources: Help your child keep track of all NIL-related earnings—whether it’s from endorsements, merchandise, or social media promotions. Keep records of payments, contracts, and any forms of compensation received.
- Separate Personal and Business Income: Set up a separate account for NIL-related income and expenses to keep things organized. This helps avoid confusion between personal finances and earnings from NIL deals.
- Set Up a Realistic Budget: Work with your child to categorize monthly expenses, including:
- Living expenses (rent, utilities, food)
- Business expenses (travel, merchandise, marketing)
- Savings goals (emergency fund, college savings, investments)
By setting realistic limits and allocating money to essential areas, your child can avoid overspending and maintain financial stability.
3. Setting Aside Money for Taxes
NIL earnings are taxable, just like any other form of income. One of the biggest challenges for young athletes is not realizing how much of their NIL income will go toward federal, state, and self-employment taxes. In addition, NIL payments can be made in different ways, from checks to electronic transfers, and may include barter deals where your child is compensated with products or services instead of money.
Steps to Plan for Taxes:
- Set Aside Money for Taxes: It’s recommended that your child set aside at least 25-30% of their NIL earnings to cover taxes. Encourage them to deposit this money into a separate account dedicated to taxes.
- Understand Self-Employment Taxes: Since NIL earnings are considered self-employment income, your child will also be responsible for self-employment taxes (which include Social Security and Medicare). This is 15.3% of earnings up to a certain limit, in addition to regular income taxes.
- File Quarterly Estimated Taxes: If your child’s NIL earnings exceed a certain threshold, they may need to make quarterly estimated tax payments to the IRS. It’s important to stay on top of these payments to avoid penalties.
💡 Tip: Consult a tax professional who has experience working with student-athletes and NIL income to ensure everything is filed correctly and your child stays compliant with tax regulations.
4. Saving and Investing for the Future
One of the best ways to manage NIL earnings is to start saving and investing early. By building a strong financial foundation, your child can set themselves up for long-term success, whether they continue to earn NIL income in the future or transition into a professional career.
Strategies for Saving and Investing:
- Emergency Fund: Help your athlete set aside a portion of their income into an emergency fund. A good rule of thumb is to save three to six months’ worth of living expenses in a high-yield savings account.
- Retirement Savings: Encourage your child to start investing in a Roth IRA (if eligible). This allows their savings to grow tax-free for retirement. Starting early gives them the benefit of compounding interest.
- Short-Term Goals: If your child has short-term goals, like buying a car, paying off student loans, or traveling, help them set up a separate account for these savings.
- Investing in Assets: If they’re ready, they can begin to invest in low-cost index funds, ETFs, or other asset classes. Even small, regular investments will help their money grow over time.
💡 Tip: Consider working with a financial advisor who specializes in helping young adults, particularly athletes, build a financial plan and investment strategy for the future.
5. Protecting NIL Income
As your child’s NIL earnings grow, it’s important to take steps to protect their financial future. Ensuring that they understand the legal, financial, and business implications of their NIL activities can help safeguard their income.
Ways to Protect NIL Earnings:
- Legal Protection: If your child enters into NIL agreements, make sure they understand the terms of the contract, including compensation, intellectual property rights, and the length of the deal. Consider consulting a sports lawyer to review NIL contracts before your child signs anything.
- Insurance: If your child is involved in high-risk sports or traveling often, consider purchasing disability insurance or liability coverage. This protects their income in case of injury or unforeseen events that affect their ability to earn.
- Build a Strong Brand: Encourage your child to maintain their personal brand by being cautious about which companies and individuals they associate with. A strong, positive image will help ensure long-term NIL success and protect their reputation.
6. Managing NIL-Related Business Expenses
Many student-athletes with NIL deals will also have business expenses to account for, such as marketing, merchandise production, and travel costs for appearances and events. Keeping track of these expenses is important for tax purposes and financial planning.
Tips for Managing NIL Business Expenses:
- Track Expenses Regularly: Use expense tracking apps or a spreadsheet to categorize business-related costs and ensure that nothing gets overlooked.
- Separate Business and Personal Funds: Consider setting up a separate bank account or business credit card to manage NIL-related transactions. This will make it easier to track and deduct business expenses when filing taxes.
- Consult with Professionals: Consider hiring a bookkeeper or accountant to help manage NIL business finances and ensure your child is taking advantage of deductions and maximizing tax benefits.
Final Thoughts: Financial Success Through NIL Earnings
NIL opportunities can be incredibly rewarding for student-athletes, but they also require thoughtful financial planning and responsible management. By helping your child understand how to manage their NIL income, set financial goals, save for the future, and protect their earnings, you are setting them up for long-term success—both in sports and in life.
Start early, stay organized, and work together to build a financially secure future. Your child’s NIL income is just one piece of the puzzle—help them navigate it with confidence and set the stage for a successful financial future.
If you have questions about financial planning for NIL or need assistance with taxes, investments, or managing NIL income, feel free to reach out to us at in**@**********************es.com. We’re here to help guide your athlete through every step of their financial journey!
Ready to take the next step in planning for NIL? Contact us today to learn more about financial tools and resources!