NBA Helping Young Players Save Money

Back in 2009, Sports Illustrated ran a study that found over 60 percent of NBA players go broke within five years of retiring from the league, and the anecdotal stories that support those findings are manifold.

Antoine Walker is perhaps the most infamous example of this, having squandered $110 million in career earnings by supporting an entourage of 70 friends and family and purchasing multiple homes, silly amounts of jewelry and one of just about every ultra-luxury vehicle that existed during the 1990s and early aughts.

“I thought I was set for the rest of my life,” Walker told CNN Money back in 2015. “My story is sad. It’s sad to see other guys work so hard throughout their life – and then they just lose it in two or three years.”

He isn’t the only NBA player to feel that way. Scottie Pippen once bought a $4.3 million Gulfstream jet that didn’t work, so he had to spend another $1 million to make it functional. Latrell Sprewell saw his $700,000 home foreclosed and his $1.5 million yacht repossessed back in 2008 because of missed payments. Derrick Coleman, who made $91 million over the course of his career, filed for bankruptcy in 2010 after piling up $2.19 million in debt owed to somewhere in between 50 and 100 creditors.

One former second-round pick even went so far as to purchase an exotic alligator just months after signing what so far has been his only NBA contract, and a relatively small one at that. He named it “Moolah” and eventually had to return it when his own moolah ran dry.

The Problem with Big Numbers

While these examples are not representative of all NBA players, it does show just how easy it can be for athletes to blow huge amounts of money when they have no concept of how much cash they actually have. It’s not just athletes, though; most human brains are physically incapable of visualizing what millions of dollars actually looks like.

“Our cognitive systems are very much tied to our perceptions,” said Daniel Ansari, a researcher at the Numerical Cognition Laboratory at Western University in Canada, in an interview with Kate Baggaley of Brain Decoder. “The main obstacle is that we’re dealing with numbers that are too large for us to have experienced perceptually.”

In other words, without watching that episode of Breaking Bad where Huell lays on top of Walter White’s gigantic block of cash, most people have no idea what a few million dollars actually looks like. Most people would look at an amount like “$30,000,000” and get lost in all those zeroes. Based on previous experiences dealing with $10 and $20 bills, most people would have no problem spending liberally under the assumption that the financial well never will run dry. How could it? Thirty million bucks is a whole lot of $10 bills!

“In line with our normal life experiences, our brains have become capable of representing small numbers, but helpless at accurately reflecting very large ones,” Baggaley writes. “Many people struggle to work with large quantities… The larger a number grows, the harder it becomes to deal with.”

Taking a basic human inability to comprehend how much several million dollars actually is and then compounding it by a number of young NBA stars who may never have learned how to budget, and it’s easy to see how financial irresponsibility could run rampant. Even those 19-year-old rookies who did grow up in homes where money was spent and saved wisely are still 19-year-old rookies. How many college-age young adults are really giving strong consideration to what their cash flow will look like 20 years down the road?

A first-round draft pick will make somewhere between $911,400 and $4.6 million in his first year in the NBA, depending on when he was drafted. There aren’t many teenagers on the face of the planet that would do smart things with that kind of money.

The NBA’s Solutions

Notice, though, that a lot of the players mentioned above have been retired for some time, and that stories about young players spending money faster than they’re earning it are considerably less common than they once were.

Part of that has to do with the expansion of the NBA’s Rookie Transition Program, which sends young players through several days of training sessions designed to equip them with the real-life skills they’ll need to survive in the league. All of these kids know how to hoop, but they don’t all know how to deal with groupies or handle their liquor or use discretion while on social media. The Rookie Transition Program educates them on all of these things and more during their short time there, and of course financial responsibility is part of that as well.

“You want to constantly reiterate to them that the average NBA career is four or five years, and you’re going to make a lot of money, but it will take fiscal responsibility to [manage it correctly],” said former Utah team president Randy Rigby in a 2014 interview with Jasen Lee of Deseret News. “This type of income is not going to be there forever, so you need to manage it so that you have [adequate] financial resources moving forward.”

If you missed it, here is the (busy) schedule for the NBA's Rookie Transition Program: pic.twitter.com/Fj15BxPLLH

— Alex Kennedy (@AlexKennedyNBA) August 9, 2016

The league also follows up on that initial transition conference by holding meetings once or twice a season to focus even more on players being smart with their money.

More recently, the National Basketball Players Association took another step in the right direction by partnering with Personal Capital, an online financial advisory firm that will offer players a free smartphone app that connects them with financial advisers and tracks their spending, investments and NBA-provided benefits.

“Our tool meets the players where they are – on their phones,” said Chief Marketing Officer for Personal Capital Matt Goines in an interview with Market Watch. “I’m particularly interested in helping the rookies. When I started working with [former NFL head coach] Bill Walsh, he said, ‘These kids can make the dumbest decisions. Can you help them?’”

And it looks like this new app will do precisely that, giving players access to how much they’re spending and how much they still have in the bank. In a very real sense, this new feature will help players visualize the large quantities of cash that their brains probably would not have been able to otherwise. Already 50 players are using the service regularly, and Personal Capital obviously expects that number to grow.

While Michael Jordan and Magic Johnson make more now as businessmen than they ever did as players, and while plenty of current NBA players have been smart in saving their money and hiring trustworthy financial advisers, not all young players are quite so savvy – particularly early in their careers.

These changes should help make stories like Antoine Walker’s a thing of the past. Most of us would lick dirty boot soles to make that kind of money, so it’s painful to see anyone squander it. This way, young players can hold onto more of that cash they always dreamed about and worked so hard to earn instead of blowing it million-dollar yachts and private jets that don’t run.

And let’s face it—no one should ever find themselves in a financial situation so dire that they’re forced to return their exotic alligator.