Setting Realistic Financial Goals for NIL Income: A Parent’s Guide
Written by Pat Brown, MBA
As Name, Image, and Likeness (NIL) deals become more prevalent, student-athletes are presented with the opportunity to earn money from their personal brand while in college. While this is an exciting development, it also comes with the responsibility of managing newfound income wisely. For parents, helping their children set realistic financial goals for their NIL earnings is essential for ensuring their financial security and long-term success.
Here’s a guide for parents to help their student-athletes set achievable financial goals that will serve them well now and in the future:
1. Understand the Scope of NIL Earnings
The first step in setting realistic financial goals is understanding the potential range of NIL income. While some student-athletes may secure high-paying endorsement deals, others may have more modest earnings from smaller brand partnerships. Parents should sit down with their children and assess their NIL income potential based on their social media presence, athletic achievements, and marketability. This will provide a clearer picture of what they can realistically expect to earn.
2. Prioritize Short-Term and Long-Term Goals
When it comes to NIL earnings, it’s important to distinguish between short-term and long-term financial goals. Short-term goals might include saving for immediate expenses like personal items, extracurricular activities, or travel, while long-term goals might include saving for education, retirement, or investing for the future. Parents should help their children set clear and measurable goals in both categories to ensure their financial priorities are aligned with their values.
3. Create a Budget
One of the most crucial steps in managing NIL income is creating a budget. Parents should work with their children to break down their anticipated earnings and allocate funds for different categories, such as:
- Savings: Set aside a portion of the income for long-term goals, such as a college fund or emergency savings.
- Taxes: NIL income is taxable, and it’s important to set aside money for taxes, so there are no surprises come tax season.
- Living Expenses: Determine any necessary living expenses, like rent, groceries, or transportation, that will be covered by NIL earnings.
- Discretionary Spending: It’s important to allocate some funds for personal enjoyment or discretionary spending, but with limits to avoid overspending.
By creating a budget, parents can help their children manage their finances in a way that aligns with their goals and responsibilities.
4. Plan for Taxes
NIL income is taxable, and this often surprises many student-athletes who are new to earning money. NIL earnings are considered personal income, and depending on the amount, this can affect both federal and state taxes. Parents should help their children understand the importance of setting aside a portion of their income for taxes. Consulting with a tax professional to ensure proper tax planning and reporting can help avoid any future complications.
5. Start Building Credit
Another important aspect of financial planning for student-athletes is building good credit. Setting up a credit card with a low limit and teaching responsible usage can help establish a solid credit history early on. Parents should explain the importance of paying bills on time and avoiding excessive debt, as this will play a significant role in securing future loans, such as for cars or a home, later in life.
6. Encourage Saving and Investing
While saving is important, investing for the future should also be a part of the financial conversation. Parents can introduce their children to investment options, like opening a Roth IRA or investing in mutual funds. Setting aside a percentage of NIL earnings for investments can provide long-term growth, which will help ensure financial independence later on. Parents should work with a financial advisor to develop an investment strategy that aligns with their child’s goals.
7. Prepare for Uncertainty
One of the most important things to remember about NIL deals is that the income can be unpredictable. Unlike a traditional job, NIL earnings may fluctuate depending on market trends, the athlete’s performance, and their brand appeal. Parents should help their children prepare for the uncertainty by setting aside a contingency fund for unexpected expenses and teaching them the importance of financial flexibility.
8. Focus on Education
While NIL deals can provide significant financial opportunities, parents should never lose sight of the importance of education. NIL income should not overshadow academic priorities. Encourage children to allocate time and resources to their studies and ensure that they are balancing their athletic commitments with their academic responsibilities. After all, education is the key to long-term success, and NIL earnings should be used as a tool to further academic and personal goals.
9. Long-Term Financial Planning
Setting financial goals for NIL earnings isn’t just about the present—it's about securing a stable future. Parents should guide their children toward making decisions that will set them up for financial security long after their athletic careers are over. Long-term financial planning might include saving for post-college education, purchasing a home, or investing in a future business. Starting this process early ensures that NIL income is used wisely to build a solid financial foundation.
Final Thoughts
NIL earnings can provide exciting opportunities for student-athletes, but without a realistic financial plan, these opportunities can quickly become overwhelming. Parents play a critical role in helping their children understand how to manage their finances, set achievable goals, and make smart decisions with their earnings. By taking a proactive approach to budgeting, saving, investing, and planning for taxes, parents can ensure that their children use their NIL income in a way that benefits them both now and in the future.
By setting realistic financial goals, student-athletes can maximize their NIL earnings while also building a secure financial future. With guidance and the right mindset, NIL can be a stepping stone to a successful, financially independent life—both on and off the field.
- Pat Brown, MBA