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[quote=Anonymous][quote=Anonymous]OP here, thanks for the insights. I'm not posing this question here to figure out a solution for my sister and parents, but rather, see how others would approach it. I have a young child, and DH and I have talked a little bit about how we want to be a safety net for our daughter as she gets older, but also want her to be independent. Given that this situation with my sister is happening now, it's made me reflect on how to create that balance in the future. [/quote]

I think, OP, that you and your husband should TEACH your current child throughout their life - in an age appropriate way - how to handle money. SO THAT you won't need to be the safety net for your child.

So when you start giving a weekly allowance (at about 5 or 6 years old), you discuss that your child will get an allowance, which is similar to income, and with that money your child needs to:
1. save some (15% for long term savings.  this is to help him when he's in college, or after high school.  It is a small amount, but it will grow. You open a savings account with interest and he watches that grow each year) (this is the beginning of an "emergency fund" - we should all be putting a certain amount of money away until we have a pot that we NEVER TOUCH and use only in an emergency (roof falls in, hospitalization, lose a job, car crashes and you have to buy a new one).  
2. save some for short term savings (20% - this is to save up for a that costs more than $5  when you go to the store, or to use during vacations to buy some thing at the gift shop. This goes into a savings box and is kept in YOUR room, not his room, or a locked piggy bank so he won't just dip into it constantly.  Eventually your child will learn you do this so you can buy a new car, go on vacation, etc - you don't survive on credit cards, you save a bit from every paycheck and then go on a fun vacation, buy a car, buy a new couch, save the down payment for the house, etc. 
3. spend the rest (s/he can buy whatever s/he wants - this isn't to buy shoes, clothing, food, but rather to buy some silly thing when you are at the store, etc.  Your child will learn that when s/he buys something junky, it breaks easily and often - and so will learn to save money a bit and buy a more expensive thing that will last.  That's great!  They will also learn they'd prefer to have a coloring book to use for weeks at grandma's house (for us it was paper dolls - we loved those stupid things!) OR spend the same amount on a candy bar that lasts 10 minutes.  AGAIN - if this takes months/years to learn, that's ok, but they will learn, over time.

(of course, he can't just buy candy and gum when you are out, children must follow house rules, so if you NEVER buy candy at the grocery store, they don't get to circumvent rules by using their money - but when you are ok with him spending his money (on vacation, to buy an X at the grocery store or dollar store or Target) then you don't tell them what to buy - their choice, and their mistakes, so will learn them over the next 10-15 years.  Again, he has to follow the rules of the house - no buying guns if you don't believe in gun play, etc.)

The percentages can be different, But let's say you give $8 per week now:

15% is $1.20
25% is $2.00
the rest is spending money for this week... $4.80

BUT next week if s/he didn't happen to spend any money this week, he'd have 4.80+4.80+his short term savings and s/he could buy a teeny lego thing!  woo hoo!  So fancy, so proud, they used their OWN money!  Or  can buy 2 coloring books - or whatever his/her heart desires  (but you must allow them to spend their spending money how they want, that's how you learn the value of money)

Then, as she/he gets older, you will discuss what your family will buy and what they need to purchase with their own money - this is based on circumstances - we'll buy you a car but you will pay your insurance.  Or you will buy all gas when you use the family car, or whatever.  We will buy all books for school, but you will buy your pleasure comic books.

And, when they start having a job where they make money, they will do the same as above (yes, there are taxes as an adult but I wouldn't deal with that horror for a child) - so babysitting, pet sitting or cutting grass all counts - they have to split it 3 ways using percentages above.

And you increase their allowance every year or so, obviously, because older kids need more $ and due to inflation.  We stopped getting an allowance by 7th or 8th grade when we were both working babysitting, delivering newspapers, etc. but you can decide that in the future.

The hope is that your child will learn how to manage money now and into their future, forever.

My parents did much of the above.  They did give my husband and I some money towards the down payment on our house as a gift, and they did the same for my sister and her husband.  BUT they had plenty of money by that time - not when we were growing up, but when we were adults.  But they WERE NOT our money saviors.  I had a very low paying job (early childhood teacher in the 80s and 90s and it was very low-paying), but I knew how to save money, (such as I had), etc.  
AND I lived with 2 roommates for YEARS until my later 20s when I went to just 1 roommate, and THEN when I got tired of that, at 31 I moved to a suburban apartment very far away from the cool city.  (but I had a larger apartment, and a garden, so that was an offset)  In short, I lived within my means.  And I bought my own car - and not on credit.  (it was not fancy, trust me)  That's what I imagine is what you want for your children.

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