“Hey, kid, get out there and play a clean game and have fun … oh, and remember to send the IRS your quarterly estimated tax check and don’t forget about the social post you owe Vinny’s Pizzeria today,” shouts the hypothetical parent of a student earning NIL money in 2024.
Lots of talented people have become young entrepreneurs in the couple of years since it became permissible for college and, in many states, high school students to cash in on their own personal brand. It’s a concept referred to as name, image and likeness (NIL) — think of a recognizable college athlete getting paid to endorse a brand’s product or a player selling signed merchandise.
While the vast majority of kids aren’t working with an Arch Manning-like windfall, people earning modest amounts may be more vulnerable to money missteps, experts say.
Young stars hoping to profit off their brand need to be savvy about their money. If you’re an athlete, here are five tips to keep in mind.
1. Review contracts carefully
It’s easy to understand why a teenage athlete might be overly eager to sign any business deal that comes their way, but tread carefully, says Helen Drew, a professor of practice in sports law at the University of Buffalo.
“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 recalls a deal she saw in which a student was being asked to give power of attorney as part of the deal. “He [the student] had no idea what that meant,” she said.
A power of attorney is a legal document that lets another person or business act on your behalf in certain situations, and probably isn’t top of mind for a 19- or 20-year-old.
“[Student athletes] have to understand a contract before they sign it,” says Luke Fedlam, partner and chair of sports law at Porter Wright Morris & Arthur LLP in Columbus, Ohio.
Drew says to pull your parents in, use caution and vet the business before signing anything. “If it looks too good to be true, it probably is.”
And if you spot a term like “power of attorney,” you may want to consult an attorney.
2. Budget earnings to last
When a reputable deal does go through, you can get paid. That’s when you have to start thinking about the future.
Assuming you’re not Bronny James, expect deals to be sporadic with varied pay. Even for those able to earn six or seven figures, classic financial concepts still apply.
Fedlam advises young earners to buckle down with a budget and plan for how to spend and save the money.
It’s a concept that needs to be drilled into adults, too. But once you do it — open a spreadsheet and set some spending guardrails — you’ll be glad you did. Put some money in savings to establish your emergency fund. Strive for $500, then build it up from there.
If your personal brand is bringing a sustainable income, it would be wise to put retirement savings on your radar now.
3. Plan to pay taxes
While you’re finding room for savings, keep the IRS in mind, too.
The good thing about a regular day job, boring as it sounds, is employers typically withhold taxes from your check — so you don’t have to do the math later. That may not be the case with a one-off NIL deal.
“Typically in these agreements, the responsibility for paying taxes is passed to the student athlete,” Drew says.
Depending on your earnings, you may need to pay self-employment tax and make quarterly estimated tax payments to avoid a big bill come April.
Athletes with higher earnings and multiple sources of income may want the help of an accountant.
4. Budget your time, too
There are many ways athletes can make money from their name, image and likeness, but social media influencer marketing tops the list of NIL activities, says Bill Carter, an NIL educator and consultant and founder of Student-Athlete Insights. (For example, Company X gives a student athlete money to post about a product on the athlete’s social media account.)
Posting for pay may sound like music to a teenager’s ears, but it may also be more work than you think.
Carter administers a monthly NIL survey of a panel of 5,000 college student athletes and 1,000 high school prospects.
According to data from the poll, a social media post as part of an influencer campaign takes about three hours, on average.
Athletes used to free-posting personal stuff on social media may be taken aback by the planning, coordination and communication required to post for a business, Carter says.
If you’re an athlete already working with limited free time, be prepared to grind it out off the field, too.
5. Seek education
Experts say financial education is essential for young athletes navigating NIL, but acknowledge it’s a work in progress.
School programs aren’t necessarily built for what comes with NIL, Drew says. She also laments the lack of basic financial education in grade school.
“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.”
Carter says his survey results regularly show student athletes involved with NIL are eager to learn more about areas like investing and the basics of how to build credit.
The good news is you can gain financial clarity by reading about budgeting, saving, credit and investing from reputable sources online. 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 when your playing (and paid posting) days are over, what you learned could set you up for financial success in what’s next.