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Share with students the following three points, asking them to write down each point’s main idea in brief:
- A life in professional baseball typically begins after many years of playing in school and amateur leagues. Rare are the professional athletes who spend less than a decade focused on their development before entering professional sports.
- When “big four” players (baseball, basketball, football, or hockey athletes) do “go pro,” they often come into sudden, dramatic increases in income. The amount of money professional players make can change their financial status dramatically.
- For many young athletes, going professional is like winning the lottery. Handling their new financial situations can be challenging, with many players facing bankruptcy within a few years of retiring due to poor financial planning.
Questions for Students:
- With this parallel between winning the lottery and entering professional sports in mind, how do you think lottery winners respond to their newfound wealth?
- Imagine you won $15 million dollars in a state lottery. How would you use your winnings? Who would advise you on the best ways to spend the money?
To the teacher: Write student responses on the board. Allow them to enjoy spending, buying luxurious homes for themselves and family members, sports cars, beachfront properties. How would they use their money? If you can, use the internet to get close to approximate costs for purchases. Encourage students to have fun with the exercise, allowing them to use their prior knowledge and their instincts to make spending decisions.
Ask students to form small groups and give each group copies of Handout #1. The Handout includes two articles about lottery winners and the issues they should consider after receiving a sudden fortune. Explain to students that the articles contain the opinions and advice of financial advisors who bring their own social and cultural perspectives to the winner’s situation — perspectives that might differ from those of students and their families. Have each student group read the articles, discuss them and answer the questions on the last page of the Handout.
Ask students to imagine they are professional baseball players recently signed to lucrative contracts. Their signing bonus and salary together are those of a first round draft pick, in this case $6,725,000.
Having considered the pitfalls faced by lottery winners, work with the whole class to create a revised list of how to spend this vast sum of money if it is to be spent freely . . . but wisely. As students name the things they would purchase with the bonus/salary money, again attach a speculative number to each item (for instance, a large house might be $1.5 million, a high performance sports car $150,000, taxes half the total bonus/salary, etc.). After you’ve compiled a list, add up the total amount spent. If the character of the list was different this time, ask students what influenced the change. Next, in connection with this second list, complete the following Do the Math! Exercise with the class, reading the directions to the group and then writing the information on the board.
Do the math!
Even if a baseball player starts his career in the best possible financial position as a number one draft pick, he’ll still have to spend significant amounts of his money that first year. Today, young players typically participate in financial planning sessions in order to be ready for the realities of a sudden increase in personal income. Below, you’ll take the salary and signing bonus, subtracting the various expenses that follow, in an effort to get a sense of the financial realities of a multi-million dollar contract.
- Salary and Signing Bonus: $6,725,000
- Taxes: 37% federal and 12% state, adding up to 50% income tax total
- Agent Fee: 8%
- Home for Self and Family: $1,500,000 (bought outright)
- Property Taxes on New Home: $25,000
- Cars for Self and Family: $150,000
- Living Expenses for Self and Family: $200,000
- Gifts to Extended Family: $250,000
- [After these expenses, our player’s initial windfall will be down to $705,044.]
To the teacher: Ask students to reflect back on how they spent their money in the Motivational Activity, checking to see if they would be in secure financial shape if they spent as they did in that first exercise. Remind them that professional baseball careers last an average of 5.6 years and the big salaries of the playing years are very rarely matched in retirement. Inform them that if they mismanaged their fortune they aren’t alone, that many players find themselves declaring bankruptcy not long after retirement because of overspending. Did they do the same?
Making Connections: In the above activities the professional athlete is often referred to as a “he,” using the male pronoun. This pronoun choice was deliberate because the big player salaries discussed in this lesson go to male athletes. In fact, the top one hundred highest-earning athletes are all men. Looking more closely, one finds examples such as this: the maximum salary for a WNBA (Women’s National Basketball Association) player is $190,550*, while the minimum salary for an NBA (National Basketball Association) player is $898,000* (for a rookie player). Efforts are underway to address such inequities, but change is incremental.
(*2020-2021 NBA/WNBA seasons. Source: https://www.spotrac.com/nba/cba/minimum/)
Do you see any instances of gender discrimination in the sports around you? Do you see any instances of gender discrimination outside of sports? What are they? Why do you think they persist? In what ways can you address this discrimination and possibly make a difference?
Provide students with Handout #2, which includes excerpts from an article written by a former NBA player who now works in financial planning advising athletes. Have students form small groups, reading the Handout together and answering the questions that follow.
Making Connections: Some players increase their already substantial incomes with money from endorsements. Do you know examples of products endorsed by athletes? Do you think endorsement tends to increase the cost of the product? Do you think it increases the value of the product? How has the culture of branding affected your own life?
Explain to students that as a class you’re going to imagine a fictional baseball player and track his financial fortunes. The aim will be to follow the player’s career and finances, assessing the decisions he’ll need to make as he goes from high school baseball to the major leagues and, finally, into retirement. Referred to as Player X, this imagined athlete starts his career with tremendous promise and the rewards to match.
Ask students to write down any significant details surrounding Player X’s financial story, starting with the following:
- Player X has a younger sister and a younger brother.
- Player X’s parents have an annual income of $56,000.
Questions for Students:
- Player X is not simply a high school baseball star, but 2019’s very best high school player in the country and a number one draft pick. How might those additional factors affect his family’s financial situation? Based on what you’ve learned in the lesson, can you speculate as to what Player X might make for a signing bonus and salary?
To the teacher: Explain to students that Player X, signing in 2019 as a number one draft pick, could receive a signing bonus in the range of $7 million dollars and a monthly salary of $1,100. The surprising difference between the signing bonus and the salary, at first glance quite strange, relates to the tax implications team owners face when salaries increase as opposed to bonuses.
- Based on what you’ve learned, speculate as to how much of that signing bonus will be left after taxes?
- List what you imagine are some of the expenses Player X may have to cover out of the money left after taxes.
- If Player X, who starts playing Major League Baseball at twenty-one, ends up having only an eight-year career that ends abruptly because of an elbow injury, how can retirement planning be a saving grace?
- How much do you think Player X should save during each of those eight years of professional playing in order to maintain his lifestyle after retirement? Assume he’ll find work after baseball, but at a much reduced salary of $60,000/year.
To the teacher: As students should know by this point in the lesson, Player X will have to pay taxes, agent fees, may buy a home for himself and possibly for his family, might want to purchase some luxury goods such as an expensive car, etc. But he’ll also need to pay for a financial planner so that he can put money away, possibly invest, and do what’s necessary to avoid bankruptcy down the road.
As a conclusion to this section, have students watch the following clip featuring sports writer and commentator Kavitha Davidson. After viewing, answer the questions as a group.
- Kavitha Davidson believes that there is a “lack of financial education in this country.” Why does she think this is an issue for professional athletes?
- Davidson makes the point that what is true for professional athletes is “true for all of us.” What can we learn from the example of professional athletes?
- Why does Davidson think that those who “don’t come from money” might face greater challenges when managing financial windfalls?