In August, the entire San Francisco 49ers football team became clients of Wealthfront, an investment management company. The goal is to help 49ers employees manage their assets and also provide them financial education through seminars.
That’s a smart move, because according to a 2009 Sports Illustrated article,
· 78 percent of NFL players face bankruptcy or other financial hardships within two years of retirement.
· In the NBA, 60 percent of players go broke five years into retirement.
Athletes from other sports such as MLB and boxing have also ended up financially ruined. Pro athletes lose millions for reasons similar to others who experience financial downfall after receiving a sudden windfall of cash through lottery winnings, lawsuits or inheritance: hefty taxes (and agent fees for athletes), big home purchases, spending money on things that only go down in value (cars, jewelry, partying), and family and friends looking for help.
The National Endowment for Financial Education estimates up to 70 percent of Americans who receive a sudden, large amount of cash will lose that money within a few years.
Added components for athletes are the brevity of a career, and youth. Typically, professional athletes have just a few years where they are considered at their money-earning peak. And, because most professional athletes start collecting a large paycheck fresh out of college, they can’t see far enough ahead, and believe their current financial status will continue for a long time.
So, kudos to the 49ers for giving their athletes the opportunity to learn the basics of money management. Here’s hoping most of them take advantage and start planning for life after the game.