5 Signs It's Time to Cut Off Your Adult Kids

(This article previously appeared on Grandparents.com.)

Navigating the issues that come up when giving your adult kids money isn't easy. Do you give? Do you say no?

"So much depends on the circumstances," says Ron Lieber, the Your Money columnist for The New York Times and author of The Opposite of Spoiled, a guide to teach kids life lessons though money. The biggest question is: "Are you giving money away that could put yourself in a situation later, when you will have to go to your child with your hat in your hand?" he says. If so, you might want to rethink your choices.

Here, how to recognize when you should and should not be giving your adult child money. Reconsider giving if:

"If you don't have enough money secured that you can comfortably live out your retirement, you shouldn't be giving money away," says money expert Mary Hunt, who heads the website Debt-Proof Living. "You can't allow your heart to override your brain; you need to take care of your retirement first."

Even if you don't have all the money saved, at this point in time you should have a retirement plan in place and contribute to it regularly. "Many grandparents take a relatively casual attitude about this," Lieber says. "They make the presumption that they will help out now and the kids will help them out later, but they never talk to the kids about it." If you're counting on your kids supporting you later but they haven't been planning for it, that could be a problem.

Hunt and other financial experts suggest having a contingency, or emergency, fund in case you lose your job or other financial issues arise and you need cash. If you don't have an emergency fund to help take care of yourself, you shouldn't be giving money to others.

The fund should have $10,000 or at least the amount needed to cover three to six months of expenses, Hunt says. If you don't have an emergency fund, try saving $1,000 or one month's worth of expenses, then build from there. But, cautions Hunt, if you've got debt, such as loans and credit card bills, start with the $1,000 and pay off the debt first, then start putting more into the emergency fund.

They don't need to sing your praises all the time, but if you give your kids money, they should at least say a heartfelt thank you. "This is also where grandparents have a wonderful opportunity to help teach grandkids to be grateful for things like their home and their family and food," Hunt says. "If something becomes an entitlement over gratitude, take a step back and close the wallet tight."

Are your kids truly in need or relying on you? "As parents, we have a responsibility to take care of our children and financially support them until they are 18, or even longer now because of the cost of education," Hunt says. "But beyond that, we need to move into a role of encouragers rather than enablers."

In other words, is there a dependency issue where your kids are sitting back and just expecting money? "Are your kids permanently relying on you, not paying the cost of things they should be able to pay?" Lieber asks. "Are they working as hard as they can, or not really?" Before you give any more money, ask yourself these questions. What you don't want is to get into an endless cycle of paying for their lifestyle.

"Sometimes helping hurts," Hunt says. "By giving, sometimes you are stopping them from being self-sufficient."

Is the money you're giving going to leisure activities? Vacations? Things you think are unnecessary? If you're not happy with how the money is being spent, maybe you should consider taking a step back. If you're concerned, one option is to write a check instead of giving cash and specifically pay for things you deem reasonable like school tuition or the electric bill.

In all of these situations above, what you don't want to do is create bad feelings. The most graceful way to bow out of giving money? Say something like "'We've done a reassessment of our finances and we're not saving as much as we should be to be 100 percent prudent, so we're not going to be able to give you money for the foreseeable future'" Lieber says. "That way, you're not lying, you're not passing judgment and you're doing something smart for yourself."

If you do choose to give your kids money, Hunt points out there are three smart ways to give:

• As an outright gift. "This is giving with no strings attached," Hunt says. This is not where you say, "I'll only give you money if you stop using your credit cards" or something where there is a condition attached. When you give an outright gift, you have no say over how the money will be spent. You're giving for the joy of it.
• As a loan. This may be for a house down payment, to help pay bills or even to get through to the next pay check. "If it's a loan, where it can go wrong so quickly is if both parties don't have the same understanding," Hunt says. For a loan, she suggests always using a formal document to outline the terms and have both parties agree to them. Even so, she says, use caution. "As formal as the document is, you should always consider that they may not pay you back," Hunt says. "While intentions are good to make good on the loan, statistically the chances of you getting your money back are slim to none."
• As an investor. This is where there is a partnership involved and legal documents should be drawn up. "You're not a cosigner on a house or a business, you're a partner with a legal contract who has a right to a portion of the value of what you're investing in," Hunt says.