NIL Money: 5 Things Every Student-Athlete and Parent Needs to Know

Your student-athlete just got an NIL deal. Now what?

NIL stands for Name, Image and Likeness, and it allows student-athletes to earn money from things like endorsements, social media posts, appearances, camps and sponsorships.

But with that opportunity comes taxes, contracts and some very real financial decisions.

In this episode of Women, Wealth & What Matters, we break down five things every student-athlete and parent should understand about NIL, including what to know before signing a contract, how to handle the money, and when it may be time to bring in professional help.

The NIL deal may be temporary, but the financial habits your child learns from it can last a lifetime.

Sources & Resources

• New York Life Investment Management, Unlocking Opportunity in the NIL Era
• NCAA, Name, Image and Likeness Resources
• IRS, Name, Image and Likeness Income
• Opendorse, Annual NIL Report
• New York Life Wealth Watch, survey on the financial impact of youth sports
• The Lebenthal Report, NIL discussion with Leda Zukowski of New York Life

Hosted by Tracy Byrnes, MBA, CDFA
Vice President, Women & Investing, Lebenthal Global Advisors

If you've got a question, a topic suggestion, or just want to say hi, shoot us an email at TracyByrnesWealth@gmail.com!

Follow us on:

X: @TracyByrnes
Instagram: @TracyByrnesWealth

Transcript

SPEAKER_00 0:03

Hey everyone, welcome back to Women, Wealth, and What Matters. I'm Tracy Burns, Vice President of Women and Investing at Labonthal Global Advisors. I'm a certified divorce financial analyst, former business journalist, and as always, super grateful that you're here and that you keep coming back. And as always, you know where to find us Spotify, Apple Podcasts, Amazon Music, YouTube, wherever you get your podcasts. Thank you again for being here, downloading all the things. All right, so picture this: your son or daughter's heading back to college, niece, nephew, whatever, they're playing a sport, and suddenly they come home and they say to you, Oh my God, mom, someone wants to pay me $5,000 to post something on Instagram. It's like, where was I when when in college? This never happened to me, by the way. I wasn't an athlete either, though. Amazing, right? You're so excited. But now what? As an advisor, the first thing I'm thinking is, is that $5,000 taxable? Can they spend it? Should they spend it? Should they save it? Wait, maybe now we should create an LLC for this kid. How does this affect financial aid? All these questions. And why is your child calling it something called NIL? What are they saying? What does that even mean? If you're confused, you're not alone. And before we even get into NIL, we're gonna talk about how much money families are already putting into their children's athletic careers. These numbers are staggering. And what's fascinating is I did this, right? I had baseball player, softball player, dancer. I spent gobs of money on all these things. But according to New York Life's Wealth Watch survey, parents spend an average of about $3,000 a year supporting their child's athletic career. Now, I don't know about you, but I was like, not even close. I would have said way more than that. And all you hockey parents out there, uh, I feel you because the amount of money you spend is insane. 64% of parents say those costs are continuing to rise. Of course they are. Think of travel teams, private coaching, the equipment. And if you have a dancer, how many costumes can you put one possibly have? Tournaments, hotels, flights, camps, pick a thing, it adds up. And I know some sports parents are listening right now saying the same thing I did. 3,000? Are you kidding? I wish. Depending on your sport and the level your child's competing at, families can spend so much more. And again, I think about these hockey parents. I have a dear friend who has two boys in hockey. My cousin had three boys in hockey. Holy cow, that's a full-time job to pay for that stuff. But here's the part that's still funny to me. Parents are incredibly optimistic about where this all might lead. In my brain, I was always, I always said I paid for confidence. That's what I'm paying. I'm paying to produce confident kids. But a lot of other parents, not so much. That New York Life survey, 83% believe their child has the skills to play at the collegiate level. 75% actually believe their children could play professionally. 49% are confident their child will earn a scholarship. And wait for this. Again, I'm going to repeat this. 75% think their kid could go pro. I mean, I appreciate your optimism and I appreciate you supporting your kids, especially as a mother of three. We were all in the thing, but come on. 75%. Dads, I'm looking at you. A lot of you guys are a little delusional. I'm just saying. But those numbers say something really important to us. Parents aren't just emotionally invested in their children's athletic careers. They are financially invested as well. It's not just about the fact that I have to get up 6 a.m. on a Saturday to take four girls to some softball game in Nowheresville, New Jersey. Oh, no, no, it's more than that. There's a financial investment here too. Yet only 22% of parents surveyed said they actually work with a financial professional to help manage those expenses. No, we just write checks and pay bills. At least that's what I did. Now throw in this NIL stuff, and suddenly that family that spent years paying for an athletic career may have a teenager or a college student who is actually earning money off all the money you invested. That's an enormous shift. That's a really important shift. And it's one of the reasons financial education needs to become part of the conversation. College sports have dramatically changed in the last few years, and they're going to continue. We can't keep up with how fast they're changing. I mean, look, Washington has taken notice and they're they're putting bills together to prevent all the craziness that's going on now in college sports. Student athletes today make money in ways that would have been unimaginable years ago. And we're not just talking about the quarterback at Alabama making a million dollars, or you know, Oregon State who's getting tons and tons of money. We're talking about like the gymnast who gets paid to post on Insta, or the lacrosse player who partners with the local pizza place, like little things like that. And your kid is getting paid or free pizza or something. What about the soccer player who gets paid to run a youth clinic? These aren't small amounts of money we're talking about either. According to research, again, from New York Life's Investment Management, the NIL market, together with the new world of the athletic department revenue sharing is projected to grow from about, this is gonna blow your head off, $1.7 billion in the 24-25 academic year to $2.5 billion the following year. That's mind-blowing to me. This is a huge business. And while the biggest headlines involve Division I stars at these colleges, the NIL opportunities are expanding well beyond those household names. Now, this topic actually came up recently on the Labenthal Report. That's the podcast hosted by the founders of MyFern, Dominic Tavella and Michael Hartzman. They are the co-founders and they sat down with Leda Zukowski of New York Life to talk about how as advisors we can help in the NIL landscape. But man, my head was thinking the whole time athletes, families, we got to start educating. I'm listening to this conversation. I'm thinking parents need to understand what's going on here because your 19-year-old might currently might all of a sudden be earning money, like real money, and they're still 19. There's a story, again, from the New York Life Investment Management Report that really bounced out at me. Performance coach Dr. Kevin Elko said, this is his words, there was an athlete who received a lucrative NIL payment on a Thursday. By Monday, money was gone. Now you could see how that happens, right? Kid gets a couple thousand dollars, he's a big shot at a bar, picks up the tab for everybody, might even went out and bought a car, dug, did something stupid, upgraded his apartment, money gone. Thursday to Monday. That's not an investment problem. That is a financial education problem. And that's why I wanted to do this episode. Okay, so we got to talk about what the heck NIL is name, image, likeness. This can be an incredible opportunity, but it can turn, because it can turn a college student into a young, aspiring business person overnight with contracts and taxes and financial decisions to make. So we're gonna have to break this down. Five things every student athlete and quite frankly, every parent of a student athlete should understand about NIL. So let's start at the beginning. What the heck is it? Name, image, likeness, NIL. What does that even mean? The NCAA describes NIL activities as opportunities for student athletes to earn compensation for the use of their name, image, andor likeness. So basically, a student athlete can potentially make money just from being their fabulous selves. I mean, this is like this is like the athlete's version of being an influencer, right? Their name, their image, their social following, their reputation, their personal brand, that's all real. Like a local car dealership might want a basketball player in an advertisement. Well, that's an NIL deal. A restaurant pays an athlete to make an appearance. You know that happens all the time. Some guy from Rutgers University shows up in an Italian restaurant to make an appearance. That kid is getting paid. That is NIL. A clothing company provides merchandise in exchange for social media promotion. Yeah, that's NIL too. Even though it's not cash, your child got paid in some shape or form. So autographs, camps, sponsored posts, merchandise all can be NIL opportunities. And this is where parents, you got to pay attention, please. NIL doesn't necessarily mean your kid is getting a big, fat, giant check. We do hear about the million-dollar deals, and those are great headlines, but that's not the experience for most athletes. Most of these kids are getting paid little bits here and there, still something. And those deals can be a few hundred thousand dollars at the end of the day, or free merchandise, or a local sponsorship. Even a small deal can teach a kid about real-world skills, and that's where you come in because things can get really confusing. NIL is changing. As I mentioned, beginning in 2025, following a brand new settlement from the house, participating Division I schools were permitted to provide certain direct financial benefits to athletes. That's different from traditional third-party NIL compensation. So we have to think about this in two buckets. I know it gets even more confusing. Two buckets of third-party NIL compensation, direct compensation or benefits from a participating school. An athlete can particip potentially receive both. I mean, and God bless your kid. But families need to understand exactly what kind of comp they're getting before anybody starts signing. Put the pens down. Don't sign. Once money starts coming in, questions become how much of that money do we get to keep? You and I both know the answer to that. Uncle Sam's gonna take his piece. Always does. So brings us to number two, the second part of the conversation. So the first, what is NIL? Anything your kid is compensated for, whether it be a t-shirt or a check. Number two, do you have to pay taxes? Heck yeah, you do. Come on now. Let's talk about this because this is the part no 19-year-old wants to hear. Taxes. The IRS has an entire page specifically devoted to name, image, likeness, income. Oh, it's there. You gotta go hunt it down, but it's there. Basically, the IRS says it is income, it is taxable. So if a $10,000 NIL payment hits your student's account, do not assume that he or she has $10,000 to go take her his or her friends away for the weekend. Don't do it. NIL income, like I said, doesn't necessarily mean to be just cash either. And this is the part that surprises a lot of families. IRS says that NIL comp can be cash or non-cash compensation. So somebody, some company gives your daughter $1,000 worth of closing in exchange for some fancy social media posts. I have to tell you, things like that, merchandise, gift cards. Athlete, that athlete may never actually receive cash, but the value, in theory, still taxable. Free stuff isn't always free. Please tell your kids this. Please tell your kids this. Depending on the arrangement, the athlete may be treated as an employee, may even receive a W-2. They also may be treated as an independent contractor. If you're an independent contractor, taxes generally aren't automatically withheld from that check. So then, will you get a 1099? Depends. Will you owe self-employment tax? Probably. That could also include Social Security Medicare. Like, do you see how complicated all of a sudden it's getting? And all your kid is thinking, yeah, I got paid to post on Instagram. We have to pay attention to this stuff because the IRS and the government are coming down on all of it. Depending on how much you're earning, estimated tax payments now be might be required, right? Is your head spinning off its shoulder? Because mine is just reading it. And of course, we have state taxes. Maybe the athlete lives in one state. Oh, here's where it gets really this is good comedy. So your athlete lives in a state, goes to college in another, performs NIL stuff in a whole nother state. Now you got three tax returns. I know, I know. State taxes can complicate things so much further, especially when home, school, and that NIL activity are all across state lines in different states. So getting that $10,000 NIL check feels frigging fantastic. And yay to your kid. But getting a tax bill later, after you spent the $10,000, does not feel as good. So we're gonna need a good CPA here. Someone who's involved, who understands this, who separates the money before you even start spending. And I'm not, I'm not gonna throw out a percentage at you. Some people say you should hold 20%, 30%. Talk to your advisor about that. I'm not giving you those numbers. Every tax situation is different, but talk to your tax advisor. Someone who puts a contract in front of you or your child, and your kid is so excited. Tell your kid, put the pen down. Which brings us to number three. Because the IRS also notes that taxable NIL income is reported on the FAFSA, and that might now affect your financial aid eligibility. Holy cow! So before your kid signs anything, don't get excited. Don't sign anything, at least not yet, because the amount they're paying you is only one part of this deal. You need to understand exactly what you're agreeing in return. How many social media posts are required? Appearances, can the company use your photograph? Like you need to understand all these things. Don't sign anything. How long could they use it? How much do you have to update? Will they continue using your image after the deal ends? You get what I'm saying here? Are you agreeing to work exclusively with that brand? What? Could that prevent you from doing a deal with a competitor? Like all these things. What if you're injured? Because that never happens to college athletes. What if you transfer schools? That's something the government's trying to put their foot down on. What happens if you stop playing? All these things. How do you get out of the contract if something goes wrong, more importantly? Ask these important questions. What are you required to do? How long could the company use my image? Ask all the things. And oh, are they taking a percentage? Maybe. Probably. Are there additional fees? What are they promising? Like all the look, this is contract law now. You have to read the thing. Make sure your kid puts the pen down. A lot of people want a piece of your kid now. And that doesn't mean everyone is bad. It just means you need to know who's sitting on your side of the table and know who you're dealing with and how they're being paid and what they're giving you in return. Because that's what this is. If a company is sophisticated enough to put a contract in front of you, you should be sophisticated enough to have someone help you understand it. Parents, I know the instinct. You want to help, you want to protect their compliance rules too. Under the current Division I framework, certain third-party NIL agreements valued at 600 or more must actually be reported through that NIL go system. I know that sounds foreign too, but that's a thing. NIL go. You have to report this stuff. So I would say first thing you do is start with your school's NIL or compliance office. Reach out. They have them now. They all do. They didn't when I was there, but they do now. And consider an attorney. You have to who understands these contracts, understand what you're getting, who's getting paid. Don't sign something simply because someone said, Everyone else is doing it. Yay! And look at me. Be smart. Be smarter than all of them. Once that contract is signed and the money finally arrives, we're gonna have another problem to solve. What are you actually going to do with that money? Okay, you got it. Now what? Contract is signed. We've got the lead, we got the accountant, we got the lawyer. Now what? Well, the money hits the account. We gotta have smart conversations. Remember the story I told you earlier about the kid that got money on Thursday who was gone by Monday? We don't want that. We don't want that. We want these kids to be smart now. And I keep coming back to that story because it can happen. You could see how it can happen. Five thousand dollars is a beautiful, beautiful compensation check. But you and I also know you could spend that like that if you're not smart. So we have to use these as financial education moments. Let's say your student got this $10,000 NIL check. Before we do anything, we stop. Again, just like we don't sign immediately, we don't spend immediately. We don't do anything with that. We don't go buy a car, we don't go buy fancy whatever the heck they buy these days. I don't even know. Remember our athlete who got paid on Thursday? This is where we're gonna keep going back to that person. This is where NIL can become a financial opportunity, or better yet, a missed one if we don't talk about it. Okay, so do not leave that 10 grand sitting in the same checking account that you're using for Uber and pizza and to pick up the bar tab. Just don't do that because it will like right through the postacive. I need you to think about how we're gonna separate this out. And I'm not gonna give you a magic percentage, but have your kid put some in a separate account for taxes. Set it aside. Separate account, don't look at it. Maybe, maybe you get involved a little and you say, My dear son, I love you with all my heart. I'm taking the tax piece. Just saying, I'm gonna hold it for you till April. You have to. Income is unpredictable. And who knows if there's gonna be more deals. A lot of kids think, well, I'm just gonna get another deal, then I could pay the taxes, uh, my tax bill later. No shot. Put a percentage aside. Now we have to build some cash reserves. You have the opportunity to build cash reserves. So many people don't have that WTF fund. What if something happens? Figure that out. NIL income can be very unpredictable. I mean, much like much like athletes in general, like God bless them. You know, there's there's we hear about these contracts that they're locked and they're making millions and zillions of dollars. But what about all the other people? All the other people whose names you don't really know, but who do show up every day and work very hard. They are one injury away from career ending. It's just terrible. It's unpredictable. So build them some predictability. Build them, help them build a lifestyle in that they get used to doing this and they don't blow the money on one shot. Depending on how the income is structured, if you have earned income and otherwise qualify, this could be an opportunity to start investing in the future. We did a podcast on the Roth IRA. I'm handing it to you on a silver platter. Your kid has earned income, open a Roth. That's all I'm saying. If that NIL income qualifies as earned income, which I get, it has to, and the athlete otherwise qualifies working and you meet all the rules, please, please, please consider that Roth IRA. Just please. I know retirement feels ridiculous when your kid's 19 and they're never gonna understand why they're doing this. 59 feels like it's 4,000 years away. But man, that kid's gonna be so happy. Just just start. Just start. Time is the one investing advantage a 19-year-old has that the rest of us actually would give anything. But I mean, I'd I would give anything to go back to be a 19-year-old and start stalking away, even if it was $10. What a difference that would make, right? But we didn't, and we didn't think like that because we thought we were gonna live forever. Follow the rules, the annual contribution limits, blah, blah, blah. Look into the Roth if your kid has earned income. Just don't throw money in an account. Talk to someone. Make sure you are eligible and you understand the opportunities. Yes, of course you have to spend some. You deserve it. Be very careful about blowing it though. On the, you know, Saturday night, I'm gonna pick up everybody's bar tab. Eh, do something that matters. Do something that is meaningful to you. Celebrate in a way that you're going to remember. Look, financial planning isn't about never spending. It's about being intentional. So maybe the question isn't more like, can I spend this? Maybe it's how much can I spend while still taking care of everything else? And everything else being, I got some set aside for taxes. I'm gonna invest some smartly. I'm not gonna blow it all. Then I'm gonna go treat myself, my friends, my parents. That's all okay. That is okay. And you deserve it. You earned it. But think smart. Help your kid think smart. Instead of saying to them, give me the money, junior, I'm gonna handle it because you're not smart enough. Don't do that to them. Help, use this as a teaching moment. Start to empower them. Use this as a moment that they can will look back on for the rest of their lives. The goal isn't just to manage it, it's to teach them how to manage it so that when the next one comes, they know exactly what to do because these numbers might get bigger. And God bless if they do. So they need some good advice now. Which brings us to number five. Build your team. Just like your athlete is on a team and has a fabulous people all around him or her, you guys now need your own team. We talked about the CPA, we talked about the attorney. You need these people in your corner. Even if it's just 750 bucks from the local pizza place, you need to understand what to do with it, which piece to save, which piece to spend. And as these contracts get bigger and more complicated, you're gonna start to rely on your team. You want the right people in your corner now. Now, when your kid is only making $750, because you know that those people just love your kid. Not when they come in later with that big mil you know, multi million dollar deal. Then I get nervous about those people. I want the people that were there with me from the beginning.

unknown 21:59

Okay.

SPEAKER_00 22:00

Start with your school's NIL or compliance office. That's your first resource. They will help your athlete understand reporting requirements, the rules, how they apply to their school, their conference situation, all the things. Use those people. That's what they're there for. We've talked about your attorney. You want someone who can read these contracts. They're popping up more and more. Find someone who has an expertise in them. Keep them in your back pocket. I mentioned your CPA. You got to talk to someone about the tax implications of this stuff, especially interestate. That stuff gets so convenient. Because you know, when a baseball player plays a, you know, he could, his hometown could be in New York, on the he could be on the New York Yankees. If he plays ball in Milwaukee, he owes tax in Milwaukee. So you gotta understand these rules. Keep the contracts, keep the receipts, 1099s, W-2, keep them all. Now, do you need an agent or a marketing representative? Maybe. Maybe. But ask your school about this. They may be able to negotiate opportunities. I sometimes think it's easier to have a third person, uh, somebody in the middle negotiate between your child and the business. Sometimes you don't want your kid doing that. You don't want to be doing that. Maybe we want a third party here. And finally, I'm sorry, this all started with Don Tavell and Michael Hartzman's podcast. You need a financial advisor in your corner that understands this stuff because it is confusing. You need someone that you can call, someone like me at any time. The agent can help you make the money, but the advisor is the person who can help you figure out what to do with it. You, if you called me, I would say, we have to put some, call the CPA, we have to put some aside. We have to be smart. We're not gonna let your child blow it all on a brand new, whatever the car of the day is. I'll age myself and say it was a Camaro, but that was in the 80s. We need to understand, and your child needs to understand that you need some cash, you need money for taxes, you need some investing goals, and that's all gonna fit in. And one point from that New York Life Investment Management uh NIL report that I think is particularly important is the idea of working with a fiduciary financial advisor because the fiduciary's obligation is to have your kids' best interest at heart. That's super important to know. So if you are looking for a financial advisor, find a fiduciary. Just saying. Or call me. Same thing. Um, okay. These are it's a lot. It's a lot. But these kids are old enough to start to understand who's making money from whom. They need to get on board. Parents, you're here. You're part of the team too. You're gonna help your child find the right people and ask good questions. And parents, I beg you, you can't, you know, I I know you see dollar signs sometimes in your kid's head, and my kid is gonna go all the way, and he's gonna have a multimillion dollar contract with the NFL and pay my mortgage off and all the things. Like, don't go there. Don't go there. It I know it's hard. Please don't go there. Be smart and rational for them. Look, this NIL name, image, and likeness stuff has changed college sports, but the bigger opportunity here for me at least is in the financial education of it. These athletes are learning to earn, negotiate, pay taxes, save, invest at a super young age. I really wish there was a college course for NIL. That's gonna be my next mission. But so if there's a student athlete in your life who's earning NIL money or even thinking about it or getting compensated for something, remember those five things, right? That money's probably taxable. Don't sign anything to you, understand it, and someone else has read it. Have a plan for that money before you spend it and build the right team around your kid and you, parent, are on the team. We could all get jerseys. It'll be fun. You don't need to have all the answers, but you just need now to be aware enough to ask the right questions. The deal may last this semester, the athletic career may last four years, but financial habits last a lifetime. And that to me is the real opportunity in NIL. All right. Share this, please, with someone who needs it. If you have a student athlete in your life, please, because this stuff is growing fast and kids need to understand. They don't, we don't want them taken advantage of. You can find us on Spotify, Apple Podcasts, Amazon Music, and of course YouTube, as I mentioned earlier. If you want to continue the conversation or have any questions, tracyburnswealth.com. I'm at TracyBurns on X, at TracyBurnsWealth on Instagram. I am always, always here if you need me. And all the sources for all the things I referenced will be in the show notes. So please look up any of these reports at any time. I am here if you need me. I'll see you next time. Labenthal Financial Services, Inc. is a FINRA registered broker dealer. The content of this podcast is intended for informational purposes only and is not intended to be investment advice. The views expressed in this podcast are subject to change based on market and other conditions. Information about the qualifications and business practices of Labenthal Global Advisors LLC is available on the SEC's website at www.advisorinfo.sec.gov. Information about the qualifications and business practices of Labenthal Financial Services Inc. and its representatives can be found on FINRA's broker check website, which is brokercheck.org.