Signing Day Money: How Young Athletes Should Start Investing (And What Parents Need to Know)
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Signing day is a milestone — and often a moment that looks like a payday. Treat signing‑day money as seed capital for a legacy, not a lifestyle. College is a temporary platform to grow income for the next chapter of life, so the smartest first moves are protective, practical, and deliberate. If you want a simple, safe plan, book a consultation and we’ll map the next steps together.
TODAY'S PLAYBOOK:
What are the immediate financial risks players face after signing day?
The excitement after signing can make rushed decisions feel inevitable. Common traps include impulsive big purchases (cars, jewelry), accepting management contracts without reading the fine print, and trusting advisors who aren’t transparent about fees or conflicts. Young athletes are also frequent targets for scams and high‑pressure sales. These mistakes aren’t just embarrassing — they can erase large portions of a windfall. Pause for 30 days, document offers, and get advice before signing or spending.
How much should you keep liquid versus invest right away?
Split signing money between short‑term needs and long‑term goals. A practical approach:
- Keep an immediate buffer: enough to cover 1–3 months of essential living costs and any near‑term college expenses (deposits, travel).
- Maintain an emergency reserve for unexpected roster or eligibility changes.
- Treat the remainder as investable seed capital for long‑term goals (education, a starter home, or future business).
Liquidity matters because college life and athletic schedules change fast. A high‑yield savings account or a short‑term, FDIC‑insured account gives flexibility while you set up the right longer‑term accounts.
What account types should parents and players consider?
Here are common, practical options explained plainly:
- Custodial accounts (UGMA/UTMA): An adult custodian manages the assets for a minor until the state’s age of majority. Funds become the child’s property and are taxed to the minor (subject to “kiddie tax” rules). See the SEC’s investor guide on custodial accounts for details: Custodial accounts (UGMA/UTMA).
- Roth IRA (if the player has earned income): There’s no age limit for Roth contributions — the athlete must have earned income and meet IRS MAGI rules. Roth accounts grow tax‑free and can be powerful for long horizons; check IRS guidance: Roth and Traditional IRA rules.
- Taxable brokerage accounts: Flexible for withdrawals and investments, but gains and dividends are taxable.
- High‑yield savings or short‑term CDs: Good for the portion you want fully liquid and safe.
Each option has tradeoffs. Confirm tax and legal specifics with a professional before moving large sums.
How should a beginner actually start investing?
Keep it simple, low‑cost, and consistent:
- Choose broad index funds or ETFs rather than individual stocks. Low fees matter over decades.
- Dollar‑cost average by setting up automatic monthly contributions, even small amounts ($50–$200). That habit reduces timing risk and builds discipline.
- Minimize fees and taxes — costly funds and high turnover eat returns over time.
Compound interest is the quiet engine here. Example (illustrative, not a guarantee): start with $5,000, add $200/month, assume a hypothetical 6% annual return — you could expect roughly $37,000 in 10 years and about $95,000 in 20 years. To test scenarios yourself, try a compound‑interest calculator like this one: SEC Compound Interest Calculator.
How should parents and players set up control, oversight, and protections?
Clear boundaries prevent conflict and mistakes:
- Document the family plan: who’s the custodian, who has signing authority, and which purchases require joint approval.
- Keep written records of contracts, gifts, and any advisor agreements.
- Vet advisors: prefer fee‑only fiduciaries who disclose conflicts and provide a written plan. Avoid advisors who push commission products or vague promises.
- Consider legal protections for larger sums (trusts or limited power of attorney) only with qualified legal counsel.
Transparency and documentation protect both the athlete and the family.
When should you hire a professional — and what should a fee‑only advisor deliver?
Hire an expert when the money is substantial, when contracts are complex, or when multiple parties (agents, boosters, family members) are involved. For details on my CFP®, fiduciary role, and SE‑AWMA® designation, see my professional profile on Fee‑Only Network: Jessica McDonald, CFP®, SE‑AWMA®.
A fee‑only CFP or fiduciary should provide:
- A written, actionable plan outlining short‑ and long‑term goals.
- Clear fee disclosure (exactly how they’re paid).
- Regular check‑ins and adjustments as situations change.
- Simple, documented next steps (account setup, tax planning, beneficiary designations).
Expect straightforward language and a focus on protection before growth. If an advisor pushes products aggressively or won’t clearly explain fees and conflicts, consider that a red flag.
How do you balance short‑term wants and long‑term goals?
Use a simple allocation framework and behavioral rules. One example split:
- 40% — Invest/save for long‑term goals (Roth, custodial, or brokerage)
- 30% — Short‑term needs and guaranteed expenses (housing, travel)
- 20% — Discretionary spending (one meaningful purchase each year)
- 10% — Giving or family gifts
Pair that with a 30‑day cooling‑off rule for purchases over a set limit and a monthly family account review. The goal: let compound interest work while still allowing the player to enjoy part of the moment.
What are the top five actions to take in the first 30 days after signing day?
- Secure the funds in a reputable bank or custodial account — don’t keep large sums in a personal wallet.
- Pause large purchases for 30 days to avoid impulse decisions.
- Open the right accounts (custodial, Roth if eligible, or taxable brokerage).
- Start recurring investments — even a small automatic transfer begins the habit and captures compound growth.
- Book a consultation with a fee‑only advisor to confirm taxes, contract obligations, and a simple plan: Book a consultation.
Are athletes really at higher financial risk?
Headlines about players who lose fortunes are cautionary, and academic research shows meaningful risks when large sums come without planning. A study tracking drafted NFL players found elevated bankruptcy rates over time, underscoring that sudden earnings without a plan can leave athletes vulnerable. For context, see the NBER summary and coverage by the American Bankruptcy Institute: NBER study summary and ABI coverage. The takeaway: planning early matters more than you might think.
Conclusion — How does treating signing money as seed capital build a legacy, not just a lifestyle?
Signing day is a launchpad. Families that protect funds, set up appropriate accounts, start simple investments, and use fiduciary advice when needed give young athletes a durable advantage. Compound interest rewards time and consistency; the first disciplined steps matter far more than any single purchase. If you want a clear, no‑pressure plan tailored to your situation, let’s talk — book a consultation or learn more about how we help athletes and families at How We Help.
References
Custodial Accounts (UGMA/UTMA) — U.S. Securities and Exchange Commission (Investor.gov)
https://www.investor.gov/introduction-investing/investing-basics/glossary/custodial-accounts
Roth and Traditional IRAs — Internal Revenue Service (IRA contribution and eligibility rules)
https://www.irs.gov/retirement-plans/traditional-and-roth-iras
Compound Interest Calculator — U.S. Securities and Exchange Commission (Investor.gov)
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Why Index Funds? — Vanguard (investor education)
https://investor.vanguard.com/investing/why-choose-index-funds
Fee‑Only CFP Profile — Jessica McDonald, CFP®, SE‑AWMA® — Fee‑Only Network
https://www.feeonlynetwork.com/financial-advisor/jessica-mcdonald/
Bankruptcy Risk Among NFL Players — National Bureau of Economic Research (academic paper summary)
https://www.nber.org/papers/w21085
Also summarized by the American Bankruptcy Institute: https://www.abi.org/feed-item/one-in-six-nfl-players-goes-bankrupt-within-12-years-of-retirement
ABOUT THE AUTHOR
Jessica McDonald, CFP® & SE-AWMA®
As a Certified Financial Planner professional and a Sports and Entertainment
Accredited Wealth Management Advisor, I've devoted my life to mastering the art of
financial planning.
I'm here to empower you with the financial knowledge and strategies you need to turn
your dreams into reality.
So, if you want to build your wealth, accomplish your life goals, and create a financial
future that exceeds your expectations, book your free consultation today.
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