When Phil LeFavor, a retired high school vice principal in Massachusetts, helped his two 20-something sons get on their feet after they graduated from college, he knew he had to do it without hurting his and his wife's retirement security. "We could live to be 90 … I have to remain sensible about our financial plan for the future, too," he says.
He invited his sons, Will and Sam, to live at home while they got started in their first jobs. He and his wife provided free housing, meals, and endless moral support. That assistance allowed Will to save up $40,000 for a downpayment on his first home, and Sam to land a job with the federal government that required months of interviewing. "We said, 'You can stay as long as you've got a plan. You're not going to stay here and blow money,'" says LeFavor.
That's just the kind of limited support that financial advisers recommend for baby boomers who want to help their 20-something children just as they enter retirement themselves. Parental assistance can be critical to 20-somethings starting their careers, but parents nearing or in retirement also need to protect their own retirement funds.
Here are four ways to help your grown children without ruining your own financial security:
1. Budget for any support you plan to provide. LeFavor knew he and his wife wanted to pay for their sons' college educations, so they planned for that expense in advance. "It was already built into the budget. I had thought about it from the time I got married, and before we had kids. We put aside money for later," he says.
Carmen Wong Ulrich, president and co-founder of ALTA Wealth Management, says in addition to saving for their own retirement, parents should put cash away—even just $20 a week—into a 529 plan or other type of college savings account. "Figure out a way to do both, especially if you have access to a 401(k)," she says. "Raise those contributions when you can and automate some college savings as well." If you can't afford to do both, set a timeline for when you can begin saving, Ulrich suggests. But be sure to save for retirement before college costs. "You need to take care of your today in order to take care of their tomorrow," she adds.
2. Provide non-financial support to adult children. By inviting his sons to live at home, LeFavor and his wife saved them significant sums of money without putting too much strain on their own budget. "Except for the grocery bill, it's not that much more to have them around," he says. Parents can also provide job-hunting advice and emotional support during those turbulent post-college graduation years.
3. Make a plan—and tell your children to have one, too. "I had no qualms about helping them as long as they had a plan," says LeFavor. Financial advisers recommend talking openly about how long your children plan to live with you (and how long you want them to stay), whether they should pay some type of rent (perhaps in the form of chores around the house), and what steps they are taking to become financially independent.
[Read: 10 Smart Ways to Improve Your Budget.]
4. Teach your kids about money early. Whether it's by showing them how you compare prices at the grocery or prioritize different spending goals, talking about money decisions early and often can help pass on financial literacy to children. Parents, studies show, play a huge role in the kinds of financial lessons children pick up.
Parents can also demonstrate the importance of savings by setting a good example. "I brown-bagged my lunch, I never stop at Dunkin' Donuts, and when I do, it's a treat. My wife and I had those conversations over the years and it rubbed off on them," says LeFavor. With both his sons now financially independent and gainfully employed, his hard work appears to have paid off.