> Posted by Jeffrey Riecke, Communications Assistant, CFI
We talk a lot on this blog about financial inclusion as it relates to specific population segments. But one group we never expected to cover is professional athletes. That is, until now…
ESPN recently aired a documentary aptly titled Broke. The film investigates why professional athletes in the United States – namely football and basketball players – have such a hard time managing their money. “By the time they have been retired for two years, 78 percent of former NFL players have gone bankrupt or are under financial stress; within five years of retirement, an estimated 60 percent of former NBA players are broke,” the film begins.
Now, if you’ve been exposed to professional sports in the United States, you’ve probably noticed that the celebrity culture surrounding top athletes includes extreme purchasing. Lots of clothes, jewelry, cars, houses. But there’s more to athletes’ financial mismanagement than big buying.
It turns out that athletes are ushered into precarious financial management from the beginning. Many are drafted in their early twenties and start out earning hundreds of thousands of dollars (the average annual salary for an NFL rookie was $320,000 in 2010). But unlike those who’ve gradually worked their way up to such earnings, these young athletes rarely have experience managing a significant volume of assets. Moreover, judging by the quoted statistic, these athletes are not working in an industry where their peers are exhibiting financial behaviors worth emulating.
Throw in the possibility of being traded to a team in a different city, not receiving a paycheck during the off-season, having a career that likely won’t last 10 years, the threat of expensive medical attention from injuries, and the expectation – or at least common practice – of providing financial support to an extended network of family and friends. When the Cleveland Browns’ quarterback Bernie Kosar declared bankruptcy in 2006, he estimated that he was supporting between 25 to 50 families.
The film points to a dramatic need for financial literacy interventions among these athletes, but standard programs might not be a match for these unique circumstances.
Financial education programs are widely available in the United States. A survey of credit unions in 2009 found that about 24 percent of them offered financial education programs of some form. In addition to private programs, the U.S. government offers a handful of literacy programs, too, including MyMoney.gov, MoneySmart (from the Federal Deposit Insurance Corporation – FDIC), and there is a wide array of resources through non-profits like the National Foundation for Credit Counseling.
It is doubtful that these programs are enough for professional athletes – or Americans on the whole. In a nationwide financial literacy test given in 2008, the Jumpstart Coalition calculated the average American literacy score to be roughly 48 percent, a failing score, and nine percentage points down from a similar report conducted 11 years prior.
One solution – which might even help “struggling” professional athletes – could prove to be the recent efforts from New York City Mayor Bloomberg with Financial Empowerment Centers (FEC). This model of unbiased, one-on-one financial advice for everyday citizens has seen to be successful in New York City and is in the early stages of being applied to other U.S. cities.
The Centers offer an outcome-based, in-person platform for people to receive the financial advice they need, working through an individual’s own personal income and expense statement and debt status. Electronic programs serve a purpose, but they aren’t an equivalent substitute to conversations with real people. The FEC program is working to standardize how financial counseling is delivered and makes a point of tracking outcomes. Its check-ins months after the initial visit reinforce changes that may have been set in motion. With 30 centers and outlets through municipal facilities – and over 19,000 participants so far — the centers may be starting to influence cultural attitudes around money management in the city.
I wonder if there’s a FEC program at the Brooklyn Net’s new Barclay’s Center? After all, it’s named for a bank.
Image credit: NPR/ESPN
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