Athlete holds a basketball against his hip with one hand.

Great wealth, great responsibility for elite young athletes

High-profile competitors – including those in college – can profit tremendously from name, image and likeness (NIL) deals. But making sudden wealth permanent requires a long-term focus.

In 2021, the U.S. Supreme Court ruled that the NCAA’s ban on players receiving compensation other than scholarships failed to meet statutory muster. Soon after, the first name, image and likeness (NIL) deals started to emerge. And now, massively popular student-athlete influencers with social media followings in the hundreds of thousands – or millions, in some cases – are able to benefit from their personal brands.

As more deals emerge, it appears endorsement deal negotiations may become part of these athletes’ unofficial education. For college athletes (and anyone navigating a windfall), this new world brings both opportunity and risk.

Let’s talk numbers

Realistically, except for spotlight players in major sports, the value of NIL deals for college athletes may be limited, according to a survey of sports marketing insiders performed by ESPN. A men’s basketball or football player might expect to earn between $5,000 and $20,000 in NIL contracts during their tenure – mostly from niche or hometown brands. An athlete in a non-revenue sport like track and field might expect to earn between $1,000 and $3,000 in NIL deals. 

However, All-American athletes could land up to $1 million in endorsement deals, according to ESPN’s panel. And for a generational headliner, the sky’s the limit.

A player’s established social media audience is expected to be a major com­ponent of their brand’s worth, according to a study by AthleticDirectorU and the research firm Navigate performed in 2019, before the Supreme Court’s deci­sion. That is, a championship-winning college quarterback doesn’t neces­sarily have a higher endorsement value than a standout gymnast with gobs of Instagram followers.

The risks of sudden wealth

Lottery winners, surprised inheri­tors, and sports and entertainment stars have a lot in common, financially speaking. And the stories of lavish lifestyles followed by sudden collapses are ripped from bankruptcy filings and spread like modern morality tales.

Those who experience sudden gain and loss say it’s not always because of super­cars and mansions. Strategic, holistic wealth manage­ment isn’t typically learned on the fast road to fame, and since sports stars aren’t typical employees with their sponsors, it’s easy for them to get caught underprepared for taxes, among many other things.

Some have also told stories of family and friends coming to them with dire financial needs and a feeling of enti­tlement, strangers with sob stories claiming their lives are in their hands, and grifters of every sort. Paranoia, isolation and behavioral shifts have followed, leading to what psychologists have called sudden wealth syndrome.

Strategies for saving and spending can make it easier to compartmentalize and handle these concerns, especially with the help of a trusted third party.

The goal: Make the temporary permanent

Earnings from fame are often short-lived – a college sports career is at most four years, and the public’s memory fades quickly. The top financial goal after any endorsement should be converting its temporary earnings into a lifelong wealth strategy.

For more modest NIL earners, using endorsement checks to invest in tax-advantaged or tax-deferred finan­cial instruments like traditional IRAs, Roth IRAs or health savings accounts (HSAs) can help reduce the amount of top-bracket taxes they are paying and provide a strong foundation for effective wealth building.

For superstars, it gets a lot more complicated.

Managing wealth can be over­whelming even when it’s built over a long career, let alone when needing to spin up a financial plan, investment portfolio, tax strategy and maybe a limited liability corpora­tion, essentially overnight.

Taxes, in particular, will be high com­pared to many other high earners who gain wealth through capital investment. Maxing out tax-advantaged investment plans every year can be part of the strategy, but there are many options depending on goals.

If the athlete is charitably minded, it may also be a good idea to create a philanthropic account like a donor advised fund, allowing them to compartmentalize personal requests while reducing their tax liabilities during high-earning years.

High-earning young athletes – as well as most young adults – should seek a professional team for guidance in understanding the complexities of strategies that can help grow and pre­serve wealth. A financial advisor, tax attorney and accountant with a track record of working with high-net-worth individuals can help.

Young athletes are a prime target for financial con artists. When selecting your financial team, it’s important to check their track records and sniff out bad actors. Here are some red flags:
  • Guarantees about invest­ment returns or “beating the market”
  • No established community presence
  • Rushes clients into decisions
  • It’s unclear how they are paid
  • Pushes exclusive investments
  • Makes clients feel overwhelmed

  • A job for every dollar

    Even the best investment strategies will come short against excessive spending.

    A zero-based budget is a good framework for setting boundaries while enjoying newfound wealth. With it, budgeters earmark every dollar, setting aside portions for things like taxes and housing, investments and retirement plans, cash savings, and luxuries and entertainment. There can be as many buckets as needed to suit one’s particular circumstances. It also makes it easier to avoid trying to keep up with the Joneses, because in the world of sports entertainment, there is always a bigger Jones.

    According to Sports Illustrated, 78% of NFL players face bankruptcy within two years of leaving the game. For NBA players, the rate is 60% by five years.

    Many universities and sports con­ferences are creating or contracting resources to help college athletes navigate the complexities of this new world. One example is Michigan State’s EverGreen program, which aims to help its athletes understand their market value, the specifics of NIL contracts and the many financial considerations.

    Great expectations

    While fame fades, fortune doesn’t have to. Vanishingly few athletes make it to the pros, but being an NCAA athlete is a compelling line on a resume. It can be a major stepping stone for a young professional starting the next stage of their life. Earnings made from their sporting years amplify that advantage, but only if they are used in a way to secure a better future.

    Sources: CBS News; CBS Sports; ESPN; Sports Illustrated; Forbes; Kiplinger; Statista;;; The Washington Post; NPR; theonlycolors. com; KTRK-TV Houston

    Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a donor advised fund for federal and state tax pur­poses. To learn more about the potential risks and benefits of donor advised funds, please contact your financial advisor.