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Money lessons your kid can learn from professional athletes

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From a kid’s perspective, pro athletes are often heroes, and it’s easy to see why: they jump the highest, run the fastest, throw the hardest, and they’re multi-millionaires to boot. But that millionaire status often doesn’t last long. A few years ago, Sports Illustrated estimated that nearly four out of five NFL players end up in serious financial distress, including bankruptcy, within two years of retirement, and that 60% of NBA players wind up broke within five years of ending their careers.

If kids learn good life lessons from athletes’ diligence and team work, then they can also learn a few personal finance lessons from their money mistakes.

Skip the lifetime supply of sneakers

We’ve all heard the story: Former NFL star goes from brute force to flat broke. But with several million dollars in assets and a six-figure salary per month, how does that happen?

Often, it turns out that they owe millions of dollars, thanks to business debts but also frivolous purchases (think hundreds of pairs of sneakers and the kind of bling-y home décor you see on Cribs). Apparently, these athletes missed Personal Finance 101: no matter how much you make, you can’t spend more than you’re bringing in.

The fact is, you need to spend less. So whether your kid is collecting money from an allowance or working a part-time job, teach him to save at least 10%. Always. That way, he’ll continue the habit when he gets his first “real” job.

Paychecks are not meant to be 100% spent

Say a sports star makes $100,000 per month. If he were to set aside 20% of his income and invest it conservatively, he’d have about $1.4 million in just five years. Even if his income dried up at that point and he didn’t add another penny to his savings, he’d end up with nearly $3 million in another 15 years.

You don’t need to make $100,000 a month to reap the benefits of compound interest. Show your child that if she saved just $1 a day starting at age 10, she’d have more than $100,000 by age 65. And remind her that she only has two feet—how many pairs of shoes does she really need?

Stick to the basics

Many pro athletes don’t know their financial basics. Some didn’t graduate from college, many are consumed with their careers while they’re playing, and since they’re earning so much, they never realize they have to be financially savvy because the money won’t pour in forever. They spend like there’s no tomorrow and waste money on bad business gambles.

Explain to your kids that you don’t have to be a math wiz or stock-market guru to succeed. But everyone needs to learn basic skills like how to save, manage a bank account, handle a credit card, comparison shop, and invest for retirement. Otherwise, you can end up broke or taken advantage of—even if you used to be a millionaire.

Have a backup plan

Athletes spend the first few decades of their lives focused on perfecting a narrow set of physical skills. When those skills begin to erode at the ripe old age of, say, 35, many of them haven’t thought about what to do next.

That’s why I love the story of one pro athlete who walks a different path. NBA star Shaquille O’Neal dropped out of college to join the league, but he’s since earned his bachelor’s degree, master’s degree, and, this year, a doctorate in education. In fact, the seven-foot star picked up his diploma last month from Barry University in an XXXL-sized gown.

Explain to kids that a degree is an investment in yourself and in your future, and that college grads earn twice as much as people who don’t go to college. Now that’s something to look up to.

Obviously, there’s no need to have some awkward sit-down about their sports heroes’ mistakes! (That’s sure to provoke an “Oh, Mom!” eye roll.) But the next time your son’s glued to ESPN or your daughter’s admiring her favorite Olympian, remind them that getting rich when you don’t know how to manage money can come with tragic consequences. Reassure them that even with “normal” jobs and fewer funds, they can wind up financial miles ahead of their athletic idols.

This post was originally published on Mint.com. © 2012 Beth Kobliner, All Rights Reserved.

The post Money lessons your kid can learn from professional athletes appeared first on Beth Kobliner.


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