When only 1 percent of collegiate student athletes end up making a living at their athletic craft1, it’s a wonder that financial literacy is not taught to every NCAA athlete. As parents, fans and athletes prepare for yet another exciting collegiate sports season, parents and athletes of all ages should prepare for life beyond athletics.
ESPN’s documentary “Broke” shows the dramatic picture of young athletes’ lack of financial knowledge. “Some guys don’t even know how to open a bank account,” noted professional basketball player Jamal Mashburn. When you mix financial illiteracy and the fact that high-performing athletes are more prone to devastating injuries than others, the risks to their financial future are palpable. Luckily, the NCAA recognizes these risks and does offer various forms of insurance for these athletes to protect against potential lost wages due to catastrophic injury.2 Despite the odds being against athletes making it to the big time, parents and schools can do small things to ensure the long-term financial future of those they care about the most.
First and foremost is earning and maintaining good credit. College students aren’t known for making sound financial decisions, and many find themselves saddled with crushing debt from student loans and credit cards. A 2013 nationwide study3 by the private, nonprofit student loan guarantee agency NSLP found nine out of 10 first-year college students scored a “C” or below on financial literacy. Understanding credit is vitally important to good financial habits. Good credit can be built by limiting student loans and making payments on time. It can also mean not rolling up credit card debt. If students do pick up a credit card for incidental expenses, those balances must be paid off each month. Doing so builds good credit and good financial habits.
REMEMBER TO SAVE
The average professional athlete retires at 33 and his or her earnings must stretch longer than the average person. And if you’re not one of the “chosen” ones, saving should begin early to prepare for whatever future may come. This saving is less about compounding interest and more about learning to plan and prepare for the unknown. Athletes notoriously view themselves as invincible and saving is part of planning for the unknown. Be it for a broken bone, loss of scholarship or an unplanned car repair, saving is a part of sound financial planning.
STICK TO A BUDGET
A budget is the basis of everything; It guides the way to purchases large and small and, when implemented appropriately, provides a clear view of a true financial situation. Student athlete softball player Maria Pandolfo4 attended a financial literacy course at Boston College, to great advantage. “The program taught me how to be smarter with my money and I realized it’s never too early to make a budget,” she said. Before going to college (or deciding which college to attend), students and parents should talk about their budgets: how much school will cost, where that money will come from and how everything will be paid for. Once students have a clear understanding of and respect for the cost of school and life after graduation, their decisions will reflect sound financial literacy. Of all the things students will learn, financial literacy is one of the most important. You can’t prevent injuries, but you can financially prepare for the future.
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Jerry specializes in retirement, insurance and tax off-set strategies for professionals and small business owners. His focus is to help clients identify their definitions of legacy and financial security while simultaneously implementing innovative strategies to help make those financial goals a reality. For more information on his services, he can be reached at: JGM Consulting LLC [email protected] (951)858-0798 Lic#0H33733