So, Your Client’s Child Is An Elite Athlete – How Do You Plan Financially For That?

Americans are spending a ton of cash to support their kids’ sports efforts – up to $500 per month and more, says a TD Ameritrade Study.

The fact is, most kids don’t get a college sports scholarship, let alone start at point guard in the NBA. So, how can advisors tamp down expectations of athletic greatness from client parents, and keep overspending in line?

According to the TD Ameritrade report, parents spend between $100 to $500 a month per child on competitive sports with nearly 20 percent spend $1,000 or more.

Those figures especially hit hard in late summer, when back to school season and fall sports leagues approach, and when the reality can start to set in..

The report reveals some interesting financial “trade-offs” parents with rising athletes in the family take:

• 67 percent of sports parents hope for an athletic scholarship
• Yet only 24 percent of athletic youngsters actually earned one
• 34 percent of sports parents think their kid will go pro or go to the Olympics
• Yet only 2 percent of athletic youngsters actually turned pro or made the Olympics

The study also points to a link between parents who invest too much in their kids’ athletic fortunes and retirement and financial readiness.

• Of the 1,000 parents surveyed, two-thirds regularly contribute to a retirement account, while one-third do not
• 57 percent have no long-term financial plan
• 60 percent say they have an emergency fund, but 40 percent do not

Advisors who are parents of sports-minded kids certainly get the picture.

Russell Rivera, president of Voice Wealth Management in New York City is on both sides of the discussion.

“As an advisor and a parent in New York, our family has spent probably $5,000
on baseball for our nine year old in the last year,” he said. “That’s $2,800 on league fees, $200 on a bat, $200 on gloves, $400 on hotel for a tournament, $600 for winter lessons, and then adding gas, tolls and other incidentals. It's a lot, and our child will never get a scholarship in the sport.”

Yet Rivera said the financial effort – and his child’s love for the game – will pay off in other life-enriching ways.

“We’re hopeful that he will learn certain skills which will help him through his life like teamwork, sacrifice, resilience and time management,” Rivera said. “Plus, he has fun competing against the best kids he can. We are fortunate that we can make it work financially, but I'm sure others have difficulty.”

Rivera noted that if your child is that talented in a sport where college scholarships are a possibility, that’s worth pursuing – just do so wisely.

“From a purely financial standpoint, knowing what you can afford to spend in time and money is hugely important. “Be realistic about your child's abilities,” he said. “Would you be better off spending the money on saving for a college education or spending it to get your kid a chance at a college scholarship? Which is going to be a better financial decision for you? If you were to curtail the spending on training and leagues by half to save for college or retirement, will your child be worse off?”

If Necessary, Be Blunt

Other financial professionals say parents could use a special dose of reality when dealing with parents that may have delusions of athletic grandeur for their home-run-hitting child.

Nicholas Fiorentino, chief executive officer of CrediReadyLLC in San Diego, Calif. said,

“It's important for advisors to be tactfully blunt with the parents of child athletes. While their opinion of their child may be extremely high, the job of a good financial advisor is not to always be the conveyor of good news.” Fiorentino said, “An excellent advisor will remind them of the odds of their getting a scholarship and/or beginning a professional career and help parents stay within their means in accordance with their own family budget.”

Even ex-collegiate athletes acknowledge it’s extremely difficult to get a decent return on investment from a promising athletic future.

Matt Topley, a former college basketball player and chief investment officer at Fortis Wealth, in Valley Forge, Pa., said, “Outside of football and basketball, very few elite athletes get more than 20 percent collegiate scholarships unless it is need-based.”

However, a sport can be the hook to get your child into a university that may be out of reach based purely on academics –and that’s a big benefit.

“Even if he or she gets a full scholarship, the 529 plan you’ve saved up can be used for graduate school or the money can be re-directed to other family members,” Toppley said.

Back To Reality

When an advisor does hear from a client that they expect to pay more for a gifted athlete in the family, accommodate some spending, but don’t let it get out of hand and always keep it realistic.

Toppley said, “A child’s athletic pursuits should in no way change your savings pattern for college.”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms. Brian may be contacted at [email protected].

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