Should You Give Money to Your Adult Children?

Only if you can afford it–and only to help them, not indulge them.

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Some in-laws came to visit last week, bringing news that their daughter had dropped out of college after her sophomore year, because as she put it, "I just don't see the point." Of course our in-laws said they hope she goes back to school, but in the meantime she has found a job at a preschool, making a little more than minimum wage.

Her salary wasn't enough to afford her own apartment, but she really, really didn't want to live at home. So she appealed to her parents. And they agreed to help her pay the rent on a two-bedroom condo which she would share with a friend. Our in-laws smiled sheepishly and admitted they also let her use their second car, because her dad takes the metro rail to work and really doesn't need a car all that much.

Their story made me shake my head. At what point do parents stop spoiling kids?

Then I thought, I have two 20-something children. They are both out of college, they're both still single, and they both have full-time jobs–not a small accomplishment in today's economy. But neither one makes much money. So I, too, find myself helping out my kids a little bit.

I do not pay their rent. But I do pay my son's cell-phone bill (it's cheaper to have him on my account than for him to pay separately), and I cover his dues for a fitness club (because I want him to be healthy). I also pay to fix my daughter's car (because I want her to be safe) and a few other sundry items.

Can I afford to help them out? Yes, I can. Does it mean that I have to cut back on expenses of my own? Yes, it does. And does it sound as though I'm making excuses? Yes, definitely.

I recall the words spoken by George Clooney in last year's movie The Descendants. He said it's great if you're in a position to offer your kids some financial support. But he added that you should give them enough so they can afford to do what they want–not so much that they can afford to do nothing.

Of course, Clooney's character is the descendant of Hawaiian royalty and sits on a huge fortune, while most of us are descendants of poor immigrants who sit on a mortgage, a car loan, and maybe some student debt.

A recent survey by Ameriprise Financial, an investment firm headquartered in Minneapolis, noted: "Nearly all Boomers surveyed (93%) say they have provided some form of financial support to their adult children. A majority have helped them pay for college tuition or loans (71%), allowed them to move home and live rent-free (55%) or helped them buy a car (53%). Many are also helping their kids pay for car and health insurance, as well as cover basic expenses like rent, utility and car payments."

The survey showed that a lot of boomers are also helping their parents, which puts them in double financial jeopardy. The result? Many boomers have stopped saving for their own retirement. Ameriprise reported that in 2012, barely 30 percent of boomers are growing their savings–down from 2007 when 44 percent were adding to their retirement accounts.

But only 10 percent of boomers say helping their parents has slowed down their retirement savings, while 34 percent feel the same about the support they’ve provided their adult children.

Even if you have plenty of company, you shouldn't allow pressure from your kids, or your natural impulse toward generosity, to hurt your retirement plans. We all need to open up a discussion with our adult children about the limits of our financial support, and about how they need to take responsibility for their own financial lives.

As for my in-laws, I'd advise them to listen to Clooney's character in The Descendants, and I hope that means they're not using money they've set aside for the rest of her college tuition to finance her current lifestyle. As for the rest of us, if you can afford it, by all means help your kids get started in life–but not at the expense of robbing your own retirement nest egg.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement, and other concerns of baby boomers who realize that somehow they have grown up.