This season, the National Basketball Association unveiled a new in-season tournament format, complete with a unique trophy and specially designed courts for each arena.
The competition, conceived as a way to drum up excitement among fans during a long regular season, also comes with a sweetener for the players: a $500,000 bonus for each member of the winning roster, and smaller prizes for the runners-up, semifinalists and quarterfinalists.
For superstars on the league's largest contracts, the prize money could mean a new supercar or an off-season trip to Saint-Tropez.
Jose Alvarado, a point guard New Orleans Pelicans, who won $100,000 as a semifinalist, has other ideas. He plans to divvy the prize money up between his two daughters, ages 1 and 3, and stepdaughter, age 14.
"I will not touch the money," Alvarado told Andscape's Marc Spears. "My financial team will act like I never made it. It's not for me. It's not in my hands. I'm living my life. They got to live their lives and I don't want them to struggle at all."
Alvarado, age 25, plans to open a savings account for his three girls, Spears reports.
The power of compounding
If he kept the money for himself, $100,000 would be a significant payday for Alvarado. He's on track to make $1.8 million this season and has earned $3 million total in his young NBA career.
But by putting the money aside for his daughters, he's showing a canny understanding of personal finance. Thanks to the long-term power of compounding interest, what could be a large amount of money for him now could be a life-changing amount of money for his children in the future.
"I ain't struggling now. I'm blessed to be financially good. So why do I need to add that extra load? Let that grow and let them have it … I just want this game to keep me blessed and I don't want my kids to worry about nothing," Alvarado said.
If the money is managed well, it will indeed grow enough to alleviate some future worries.
Currently, several online banks offer interest rates in the neighborhood of 5% on high-yield savings accounts. At that rate, a $100,000 deposit in such an account would be worth about $331,000 after 24 years, when Alvarado's youngest daughter will reach her father's age, according to Make It's compound interest calculator.
Or say Alvarado's team invests the entire $100,000 in a tax-advantaged retirement savings account that returns 8% per year, on average — not a terribly difficult number to imagine given the historic performance of the broad U.S. stock market. By the time the oldest daughter reaches age 67, the portfolio would be worth nearly $7 million.
Editor's note: This story has been updated to reflect Alvarado's final earnings from the tournament.
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