NIL Money: 5 Things Every Student-Athlete and Parent Needs to Know by Tracy Byrnes, CDFA®

Your son or daughter is playing a college sport and suddenly comes home with news:

“Someone wants to pay me $5,000 to post something on Instagram.”

Amazing.

But now what?

Is the money taxable? Can they spend it? Does it affect financial aid? Who reads the contract? And what exactly is NIL anyway?

If you’re confused, you’re not alone.

Parents are already investing heavily in their children’s athletic careers. According to New York Life’s Wealth Watch survey, families spend an average of about $3,000 a year supporting their child’s sports, and 64% say those costs are rising.

(And hockey parents, I know you’re laughing at that number.)

Now, some student-athletes actually are earning money from their sport. That can be an incredible opportunity, but it can also turn a college student into a young businessperson overnight.

Here are five things families need to know.

1. Understand What NIL Is

NIL stands for Name, Image, and Likeness.

Student-athletes may earn money from sponsored social posts, appearances, camps, advertisements, merchandise, and local business partnerships.

And forget the million-dollar deals you see in the headlines. For many athletes, NIL may mean a few hundred or a few thousand dollars, free merchandise, or a local sponsorship.

2. Yes, It Can Be Taxable

The IRS says NIL income is taxable, and that can include more than cash.

Merchandise, gift cards, and other compensation may count too. Depending on the arrangement, taxes may not automatically be withheld, and self-employment taxes may apply.

Abd big note: NIL income may also affect financial aid.

Bottom line: Set aside money for taxes before spending anything, and consider involving a CPA or tax professional.

3. Don’t Sign Something You Don’t Understand

A $10,000 offer sounds exciting. But what is your child agreeing to in return?

How many posts or appearances? How long can the company use their image? Is the deal exclusive? What happens if they transfer schools, get injured, or want out?

For a meaningful contract, start with the school’s NIL or compliance office and consider having an attorney who understands NIL review it.

4. Have a Plan for the Money

One story from a New York Life Investment Management NIL report stuck with me: an athlete received a lucrative NIL payment on Thursday.

By Monday, it was gone.

That’s not an investment problem. It’s a financial education problem.

Before spending, remind your kid to set aside taxes, build some savings, and think about the future. Depending on the athlete’s situation and eligibility, this could even be an opportunity to start a Roth IRA.

And yes, of course, spend some too.

But the question isn’t, “Can I spend this?”

It’s, “How much can I spend while still taking care of everything else?”

5. Build the Right Team

The bigger the opportunity, the more important it becomes to have the right people around your athlete.

That could include the school’s compliance office, an attorney, CPA, agent or marketing representative, and financial advisor.

Parents are part of that team too. But instead of simply taking over, use NIL as a chance to teach your child how to manage money.

Because that may be the biggest opportunity here.

The NIL deal may last a semester.

The athletic career may last four years.

The financial habits can last a lifetime.

For more, I did a full podcast on this topic at tracybyrneswealth.com.

Tracy Byrnes is a CDFA® | Lebenthal Global Advisors

Tracy Byrnes is a CDFA® and Vice President, Women and Investing, at Lebenthal Global Advisors. She is the author of Deduct Everything: What You Need to Know About Trump’s Tax Cuts & The One Big Beautiful Bill  and she hosts the podcast Women, Wealth & What Matters: 5 Things with Tracy Byrnes.  Her mission is to empower women financially so they can pursue their goals and confidently plan for the future. Tracy holds an M.B.A. in Accounting from Rutgers University and a B.A. in Economics from Lehigh University. She is also a financial expert featured on multiple national networks and in media outlets. For more financial education and conversations, visit TracyByrnesWealth.com.