Don’t jeopardize your finances when adult children move back home

The economy has taken its toll on middle-aged families and empty nesters, who may be paying down mortgages, auto loans, credit card debt and bills. Coupled with their regular expenses, most adults are also focusing on building their retirement savings and ensuring they have sufficient healthcare options. So when cash-strapped adult children move back home to live with parents, the latter may feel the pinch to their wallets even more.

A recent survey conducted by the National Endowment for Financial Education shows that nearly 60 percent of parents are supporting their adult children. Analysts broke down the results to find that 50 percent of parents were providing housing to kids who were no longer in school, and 48 percent are helping their children with living expenses. Thirty-five percent are covering their children's insurance costs and 29 percent admitted to handing out spending money to their kids. While it's natural for parents to want to help their children, some experts warn adults against running up credit card debt, co-signing for loans or jeopardizing their own financial futures to provide aid to adult children.

"We all want to ensure the best for our children," said NEFE president and CEO Ted Beck. "But if you are taking on extra debt or delaying retirement to help your adult child, you could be making a mistake and putting your own financial future in jeopardy."

There are several actions parents can take to both continue helping their children while protecting their own assets. A recent New York Times article urged parents to require adult children who are living back at home to make contributions. Assigning small tasks, such as purchasing groceries, taking care of the dry-cleaning, completing household chores and getting a part-time job to tide them over, can make a big difference in how much time and money parents spend supporting their children.

In addition, it's important to have a financial and debt discussion with children to avoid becoming their money tree. For example, helping children create a budget or requiring them to seek financial counseling for severe credit card debt or student loans can help young adults take control and ownership over their finances. And while parents should play a role in helping their children understand their credit agreements and terms, experts urge parents to let their children find solutions to their problems before jeopardizing their own financial security.