Thanks everyone for your support and words of wisdom. We're still not sure what the best approach to this is. At this point I don't think any of this is going to work...not the tough love nor the paying him to save his money. Have any of you ever listened to Dr. Laura? I don't agree with everything she says but she's tough when it comes to making a man be a man by making him stand on his own two feet. I can hear her saying 'no way' in allowing LW to move in with us (and I agree). I think in the end he'll end up piling in with his mom and sister because they have the same values when it comes to money and responsibilies. I think if he comes to us and asks to live with us we're going to suggest he find a 'room mate' to share an apartment with. That way we won't have to be in the middle of his life and he won't be dependent on us.
What's sad is LW is such a delightful person...he can be funny and a riot to be around...it's this side of him that's his downfall...like an addict he knows he has a problem, but he's not doing anything about it except acknowledging he has a problem. We've suggested financial counseling before but it fell on deaf ears. You can lead a horse to water but you can't make it drink.
If anyone else has anymore suggestions I'm all ears.
As for the tough love, I had to use that on my 15 year old son 16 years ago...and it turned his butt around in no time. To this day he thanks me for it and says I loved him enough to be tough on him, which is what he needed. I think that's what LW needs...but, he's not my son and he's not 15 years old. Is he going to listen to me and his dad? He hasn't so far. I really don't see that changing.