As parents, our instincts tell us to protect and love our children. Helping your children is one thing; financially enabling them is another.

Entrepreneurs often struggle with this problem. They might have a lovely home, a new car and other assets, but only because they sweated and sacrificed to earn them. Their kids, though, don’t always see the hard work that went into earning those things. Or they overestimate just how “rich” their business-owning parents are.

In some cases, the children take it for granted that Mom and Dad will always open their wallets upon request, long after the kids have moved out. And Mom and Dad—whether they’re motivated by worry over their children’s well-being or guilt that they’ve spent more time on business than family—will comply without asking tough questions.

According to Merrill Lynch, a whopping 68 percent of Americans age 50 and older provide financial support to an adult child.

A real-life example happened to a middle-aged couple who had a daughter who was in her early 20s and living thousands of miles away. She suffered an injury while jogging one day and needed cash to help her with medical bills. Mom and Dad eagerly complied.

A few months later, Mom and Dad divorced, and they felt enormously guilty over the breakup. Their daughter continued to ask her parents (now divorced) to finance every request and ultimately moved in with her mom.

Just a few years later, Dad was broke, losing hundreds of thousands of dollars, partly because of his inability to say “no.”  Unfortunately, Mom was no stronger at saying no than her ex-husband, and she wasted hundreds of thousands of dollars as well. These parents didn’t understand that their financial needs have to come first.

Warning Signs

How do you know if you’ve crossed the line from empowering to enabling?

-Your child no longer is trying to make it on his or her own because they rely on your assistance.

-You’ve stopped or have lessened the amount you contribute to your retirement fund so you’ll have the money to give to a child.

-Your child is wearing $150 designer jeans while you’re shopping the sale rack at Target.

-You feel resentful (or angry) about giving the money, but don’t know how to say “no.” Your child shows no appreciation for your help and either threatens or cuts off communication until you acquiesce.

Setting the Ground Rules

Entrepreneurs need to first ask if giving money will empower their children to move in the right direction. A one-time Band-Aid is one thing; a regular cash infusion is another.

Here are a few ideas to consider before you financially help a child.

-Insist they work. Many entrepreneurs will put their teenage children to work in their own businesses, even if it’s in a part-time, support capacity. Not only will they learn the value of work, they’ll see just how hard you work. That’s not always the best option for every family; the kids might need to find a job with someone else. By insisting your children work, though, you establish the importance of earning a livelihood.

-And there can be significant tax advantages to having your child work for you. If your child is under 18, and your business is a sole proprietorship or a partnership where both partners are the child’s parents, your payments to the child are not subject to Social Security or Medicare taxes. Put that money into a Roth IRA, and you’ve made a significant contribution to your child’s long-term financial well-being.

-Before handing over a check, establish ground rules. Is this a one-time loan or a gift? Is the child expected to pay it back?

-Put it in writing. This is a great way to help a younger adult child experience what it’s like to manage a financial obligation. For example, if the money is to go toward the purchase of a car, write up an agreement that includes terms, the length of the loan, and whether it is principal only, interest-only or principal and interest.

-Understand the IRS rules regarding gifting children money.

-If you have more than one child, be sure you and your spouse are on the same page about equal assistance. One child could wind up feeling slighted if a request is turned down.

-Get professional help. A good financial adviser can give you an objective view of your situation and help you turn it into a learning experience for your family.

Financially empowering your kids is no different than coaching and teaching them the correct techniques in sports. You can teach your son or daughter the correct way to dribble, pass, shoot, defend and rebound in basketball, but you cannot step onto the court to try and help them during the game.

As ridiculous as that sounds, it’s representative of what many parents do when it comes to their children and personal finances. They never give their kids the opportunity to overcome a problem—and enjoy the satisfaction of succeeding on their own.