The ability for college athletes to earn money from their Name, Image, and Likeness (NIL) is a transformative opportunity. However, with newfound income comes significant responsibility—especially when it comes to managing money, protecting their brand, and planning for their long-term financial future. As a parent, it’s essential to guide your child through this process, ensuring they make smart NIL decisions that protect not only their earnings but their future as well.
Here’s how you can help your child make wise NIL decisions that set them up for success now and in the years to come.
1. Understand NIL Earnings and Their Impact on Taxes
The first step in protecting your child’s financial future is ensuring they understand that NIL earnings are taxable. NIL income comes from various sources, including endorsements, social media partnerships, appearance fees, and merchandise sales, and all of this income is subject to tax. Failure to set aside money for taxes can lead to financial issues down the road.
How to Prepare for NIL Taxes:
- Set Aside Money for Taxes: A good rule of thumb is to save 25-30% of all NIL earnings for taxes. This covers both income tax and self-employment tax (since NIL income is considered self-employment).
- Quarterly Tax Payments: Student-athletes who earn over $1,000 annually from NIL must make quarterly tax payments. Work with a tax professional to ensure they stay compliant.
- Track Income and Expenses: Keep thorough records of all NIL-related income and expenses, such as social media management, travel, and merchandise costs, to maximize deductions and minimize taxable income.
💡 Pro Tip: Involve a tax advisor early on to help with quarterly payments and planning for larger tax obligations.
2. Teach the Importance of Budgeting and Saving
While NIL earnings may seem like a significant windfall, it’s important to teach your child how to budget wisely and save for future needs. A clear financial plan can help prevent overspending and ensure they are setting aside money for both short-term needs and long-term goals.
How to Set Up a Budget:
- Track Income: Make sure they know how much they’re earning from each NIL deal—whether it’s an endorsement, merchandise sales, or social media promotion.
- Create Categories: Help them categorize their spending—needs (e.g., training costs, educational expenses), wants (e.g., entertainment, fashion), and savings (e.g., for emergencies or long-term goals).
- Set Goals: Encourage them to create both short-term and long-term savings goals, such as building an emergency fund or saving for college tuition, a car, or investing for the future.
💡 Pro Tip: Use a budgeting app like Mint or YNAB (You Need A Budget) to track income and expenses. Visual tracking tools make sticking to a budget much easier.
3. Protect Their Personal Brand and Online Presence
NIL offers a unique chance for athletes to develop their personal brand, but with this opportunity comes the need to protect their image. The decisions they make now, both online and offline, can affect their brand long after their athletic career ends.
Steps to Protect Their Brand:
- Monitor Social Media: Teach your child to be mindful of their social media activity and avoid posting content that could negatively impact their reputation.
- Choose Endorsements Carefully: Help them assess whether the brands they are endorsing align with their values and goals. Signing with a brand that doesn’t reflect their image could harm their reputation and future partnerships.
- Understand the Long-Term Implications of NIL Deals: Ensure they are not locking themselves into deals that could limit their opportunities in the future or restrict their brand growth.
💡 Pro Tip: Help them develop a social media strategy to ensure their online presence aligns with their personal and athletic brand, keeping it professional and appealing to future sponsors.
4. Start Saving for the Future: Investments and Retirement
While the focus may be on earning money in the short term, it’s important to teach your child the value of investing for the future. NIL earnings offer a unique opportunity to start building wealth early on, setting the stage for a financially secure future.
Ways to Invest for the Future:
- Open a Roth IRA: Encourage them to open a Roth IRA. Since they are still young, they can benefit from tax-free growth on investments and early contributions.
- Low-Risk Investment Options: Teach them about investing in index funds or ETFs (Exchange-Traded Funds), which provide diversification and are less risky than individual stock investments.
- Set Long-Term Goals: Help them understand the power of compound interest—starting to invest early can significantly impact their financial future, even with small contributions.
💡 Pro Tip: Starting early gives your child the advantage of compound growth, so encourage them to start with even a small amount and increase it as they continue earning from NIL.
5. Protect Their Earnings with Insurance
As an athlete, your child’s ability to earn money is tied to their physical and mental health. It’s important to protect their income with the right type of insurance.
Types of Insurance to Consider:
- Health Insurance: Ensure they have adequate health coverage, including coverage for injuries, medical expenses, and rehabilitation.
- Disability Insurance: If your child’s career in sports is significant, consider disability insurance that protects their income in case of an injury that prevents them from performing.
- Liability Insurance: Depending on their NIL activities (such as content creation or public appearances), they may need liability insurance to protect against lawsuits or claims related to their business activities.
💡 Pro Tip: Consult with an insurance advisor to explore policies that can protect your child’s NIL income and career.
6. Guide Them Through Contract Negotiations and Legal Protections
Contracts are an essential part of NIL deals, and helping your child understand the terms of these contracts is key to protecting their earnings and ensuring that the deals are fair. A poorly negotiated contract can lock them into unfavorable terms that limit their future opportunities.
How to Protect Their Future with Contracts:
- Review Contract Terms Carefully: Always review the terms of any NIL contract, paying close attention to exclusivity clauses, payment schedules, termination clauses, and performance expectations.
- Seek Legal Advice: If necessary, help your child work with an agent or lawyer who specializes in NIL contracts to ensure the terms are fair and that their interests are protected.
- Avoid Conflicting Deals: Ensure that any NIL deals your child enters into don’t interfere with other opportunities, such as athletic sponsorships or business ventures.
💡 Pro Tip: Before signing any deal, consult with a lawyer or NIL agent to ensure the contract aligns with your child’s best interests and future goals.
7. Encourage Long-Term Career Planning
While NIL is a significant opportunity, athletic careers are often short-lived. Teaching your child to plan for life beyond sports is crucial to ensuring their long-term financial success.
Key Areas for Long-Term Career Planning:
- Education: Encourage them to focus on their education and set up a career outside of sports in case they don’t go pro or transition after their playing days.
- Networking: Help them build relationships with industry professionals, including those in business, media, and marketing.
- Entrepreneurship: If your child is entrepreneurial, guide them in starting their own business or creating content that can generate income after their athletic career ends.
💡 Pro Tip: Introduce them to potential career mentors or business professionals who can provide guidance in building a career post-sports.
Final Thoughts: Securing Your Child’s Financial Future Through Smart NIL Decisions
NIL has created incredible financial opportunities for student-athletes, but without careful management, these opportunities can quickly be squandered. As a parent, your role is to guide your child in making smart decisions about their earnings, investments, and long-term financial security.
By teaching them financial literacy, encouraging responsible spending and saving, and helping them protect their brand, you can set them on a path toward lasting financial success—both during and after their athletic career.
