It could be video games. It could be clothes. That’s what even the conservative marketers claim teens still spend most money on, divided along the expected gender lines. I can hear every teen I know saying I’m stereotyping. But that’s not the point. You know when your teen has an addictive shopping habit. And it’s important to break those habits.

It’s not enough to just lay down tough ground rules, such as telling them they can only spend their allowance or side job money, but you’re not going to keep giving them extra money. That’s treating the symptom, not the disease.

I’ll use clothes shopping for the following habit breaking program because that sort of shopaholism goes far beyond teens; it’s endemic in our culture. But the advice does work for any addictive shopping habit.

The step by step process may sound odd for the first couple of steps, but bear with me, there is a method to it.

1. Tell your fashionista that for two months, no clothes shopping. That includes accessories–hair thingies, purses, etc. Personally, I also strongly recommend including makeup in this. Your teen will be devastated, so hurry up and move on to telling them about #2 and 3.

2. They can spend their money on anything else. Normal allowance or side job money rules apply–for instance, if you insist they save a portion of their money, they must still do that.

3. Reward them for stopping the rituals that feed the habit. Let me explain. A shopaholic will be constantly looking at clothes, in magazines, online, at the mall. The key to breaking the habit is ending the focus. So, for each week that they don’t read fashion magazines, or window shop either online or at the mall, double their allowance. This is a critical step. Be encouraging and kind here. It may be very hard for your teen to do this. Have other magazines around for them to look at; magazine flipping can be a way they’re used to relaxing.

4. Encourage a new physical or artistic activity. Introduce running, yoga, a new team sport. Breaking an old habit is made easier by being involved.

5. After the first two months, allow your fashionista to buy one piece of clothing in the third month. Just one. Your teen’s perspective will have changed. They will probably make a more careful selection, something they actually want instead of something they’ll wear once and throw into the pile. Talk to them about it, and what the process is like. Don’t be an I Told You So. Ask how it felt to purchase that one thing. Talk about how much more money they’ve had for other interests, such as concert tickets. Keep up the bonus money for no ritual habits like fashion magazines.

6. For the fourth month, tell your teen that one purchase per month is the new norm. And yes, buying a lip gloss counts as one. No more bonuses for staying away from the ritual stuff, unless you think your teen is still really battling the habit.

Three months can break a lot of habits. It will definitely change attitude, awareness, and behavior. Some teens may be more obsessive, and, say, save their money, and then take that first shopping opportunity in the third month and buy something outrageously expensive.

Let it go. See if they really love that thing they bought. If they do, great, they’ll know the value of saving up for something really good, versus a lot of impulse, addictive buying. If they don’t love it, they’ll learn that they were acting out and the only person it negatively affected was themselves.

Do try to be patient and positive. Even if you find the shopping habit distasteful, it is always hard to break a habit. Talk to your teen about how important it is not to be a slave to shopping. It’s not just important in terms of their relationship to money, but their emotional health as well. Ask how they feel, a lot.

Good luck and please send on any feedback from the teens themselves, if they go through this process.

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This time of year is even scarier than the beginning of December in terms of me being an ATM. Maybe because kids can blindside you now, and by December you’re ready for them.

So innocently, my daughter said to me yesterday: We’re going to see her cousins on Thanksgiving, the first holiday of winter, as she calls it, and she knows just what gift to get them. But we should order it online now before they run out.

I was sitting at the computer entering my credit card number on the latest greatest kid electronics before I realized that we were also going to see the cousins-aunts-uncles over Christmas.

Wait just a minute. We¹re going to do Christmas/Hanukah/Kwaanza/Winter Solstice/Whatever shopping at Thanksgiving and then again in December?

How did that happen? But once she was done with her rebuttal, which seriously rivaled Jimmy Stewart¹s court speech in Mr. Smith Goes to Washington, I realized that she was right, that our society has demanded double gifts, and did so nice and slowly so I didn¹t notice I was being had.

Here’s her argument: You can’t go to someone’s house and stay the long weekend and not bring cute gifts. And you know darn well when we go back to the cousins at Christmas, we’re not going empty handed.

She had me. And I’m a pragmatist. Looking at her folded arms, her smug look of victory, her iron clad logic in pink fuzzy leg warmers as she pointed back to the computer screen, I knew this was my new reality. My next challenge was to find a way to bring it within some semblance of control–after I ordered the pink electronics, of course.

So here’s the deal: I love budgets and revenge. I called my sister, knowing full well that if my little lawyer was selling me on cousin gifts, the cousins were doing the same thing. And if I was going to impose serious restrictions on my daughter, it was important that it be the same on the other end, so they weren¹t being extravagant while we were being controlled. Nothing worse than looking like the family tightwad at a holiday gathering.

That said, if you can only get your immediate family to buy in, do it anyway.

We came up with this plan:

Have your teen make a Gift Chart that includes every kid in the extended family that you’re going to see between now and New Year’s. If you¹re not going to see them, but there are other family members, they get a homemade card and a homemade food gift.

Next, put on the chart how many times you’re going to see each kid. e.g. We’re going to see cousin Olivia at Christmas but not at Thanksgiving. So she will be budgeted for one gift. We’re going to see cousin Christopher at both, so he’s budgeted for two.

Tell your teen that this year you’re doing three categories of gifts: purchased ones, handmade ones, and handmade food ones. The food ones are automatic for anyone you¹re not actually seeing, and they are one of two gifts for anyone your family is going to see twice. Food is also going to be made for stocking stuffers.

Tell your teen they can choose two people to buy gifts for, and the rest will be homemade gifts. For the purchased gifts: Have your teen go online and price what he or she considers a good Christmas gift. This can be a category, such as: kid iPod.

Have them search on an item, and then look for the best deals–may as well add the comparison shopping challenge in there. Once you find the best price, that¹s the budget. And that is it. You put the cost ceiling for each kid that is getting a purchased gift. If you have a more than one kid, it is likely that the purchased gift would be for a sibling. (Another idea to bypass even this is to get one family gift for your entire household, like a DVD player.)

Once the budget is set for the purchased, it is immovable, even if your kid decides they want to get their sibling a Wii game or a karaoke machine instead of a kid iPod (which runs $20 - $40). The reason for this is key: This is how teens get you. They rely on being fickle. As the advertisers, who are smart, don¹t forget, when they up the ante for expensive gifts, your kids are first in line to buy in.

5. An addendum rule: My daughter can spend a fortune in the “wrapping paper” category: keychains for backpacks with cute stuffed animals on them, singing cards, pocket lip gloss—all the impulse purchase stuff at the checkout counter. Have kids make these novelty items with some pom-poms, googley eyes and glue, and some clip ons you get at the crafts store.

The crafts store. Now we¹re getting to the heart and soul of this Christmas and Thanksgiving and whatever else shopping season. Craft stores are amazing fun, and kids can come up with great ideas. Honestly, they¹ll remember how much they love making things.

You make two trips. The first one is for ideas: Bring the gift chart and have the kids decide what they want to make for each person. Then go back home and see what materials you already have. You may be surprised. For instance, if you¹re making handmade stuffed animals or dolls for younger kids, old clothing can be used for the material, yarn for hair or a horse¹s or lion’s mane, old pillows for stuffing.

And you know what makes beautiful wrapping paper? Brown paper grocery bags that are painted.

After you’ve exhausted what you can make with available materials, if you still have people on your list, make a list of ideas and the materials you still need.

Then go back to the craft store, or the hardware store, or the dollar store.

In fact, comparison shop all of these for the materials you need. Include online outlets for discount craft supplies.

Keep track of everything you spend this year, if you do decide to go the homemade route. And take stock: If you have a way to compare to last year’s spending, show the kids. They¹ll be amazed. And I¹d be surprised if they don’t like what they produce far better than what they¹ve bought in the past.

I’d love to hear about craft ideas as well. And not just for the holidays: Birthdays, anniversaries, baby showers…

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I’m always alarmed when students tell me how much they’re expected to pay for a single new textbook, even though I know all too well how much they cost.

At $100 a pop in some cases, this is such a serious expense, especially for students paying their own way. The fact that textbooks are now tax deductible under the Recovery and Reinvestment Act only helps a bit.

What really helps is to pay less to begin with.

The good news is that if college students don’t wait until the last minute, often that $100 text can be had for $5 on eBay, or Craig’s List, or used textbook sites that are popping up from demand.

The trick is for college students to start shopping for the textbooks the moment they register for Spring semester 2010.

When I asked one of my students why he paid $100 for a textbook that was available on eBay, or even Amazon for a discount under used books, he could only say: “I was in a hurry.” He waited until the semester began, so even if he could find the textbook he needed online–which he probably couldn’t, because they were all snatched up–he would have missed assignments and gotten behind if he had to wait for the book to ship.

The domino effect of poor planning, or no planning, is my favorite part because it’s such a multi-faceted money lesson for students.

So, here’s the path for college students to take for cheaper textbooks.

Get your college students to go to their advisors right now to decide on next semester’s classes. Register for classes the first day they can. (For incoming freshman this is of course the first step.) It’s past mid-term time now, so that day is upon us, or is coming very soon. Early registration is key.

After registering, go online and start comparison shopping: Amazon, eBay, Craig’s List, used textbook sites. Make sure to have your kids do due diligence on any textbook site they shop at. There should be a phone number to call if there’s a problem, or don’t let them shop there.

Buy the textbooks online ASAP. Sometimes used textbooks can be more damaged than anticipated when you buy them online for $1, so you want there to be ample time to return it, and try again.

Have college kids total the amount they spent for textbooks this time around, versus this present semester. If it’s your money they saved, and you can afford it, it might be nice to deposit the amount saved in their 529 college fund or savings account.

A bonus idea for enterprising college students: Once college students get the hang of comparison shopping textbooks, they could start a side business. They can tell their friends how much they saved registering early and shopping online. They can offer to comparison shop and purchase textbooks for fellow students in exchange for a set fee or a percentage of the money they save people.

They could even advertise this service on their Facebook pages.

I’m very curious to see if any students turn this into a side business. And of course I’d like to know how much money students are saving by buying used textbooks.

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I’ve decided I’m going to invent a board game. Forget Monopoly, let’s play Bankruptcy. Actually, the game is called DEBT. My husband says Bankruptcy is too harsh.

We can teach kids about budgets and keeping records and drafting ledgers, but unless we put into practice paying off debt when there’s no money left at the end of the month, we’ve fallen short.

The whole point about crushing debt is that there is no money to pay it off. Yet we have to, or we’re trapped for life. Could there be a more perfect time for this game? They can see the micro in their own homes, the macro in our economy.

So here we go, a game to teach them about paying off debt. And hopefully, when they see how hard it is, they’ll be more mindful about living within their means to begin with.

When I talk to my students about living within your means, I always start by saying that when I learned about money management and buying a house, the popular thinking of the day, way back at the dawn of time, was that your monthly nut for your mortgage shouldn’t be more than 20 percent of your income.

Ha. That percentage inched its way up to 50 percent (and sometime more!) by the time the mortgage crisis exploded last year. An impossible situation.

The game:
Rule 1. Create a fake ledger with these variables of monthly expenses:

• Rent
• Food
• Car insurance
• Health insurance
• Utilities–gas, electricity, landline phone, water, cable/satellite TV
• Transportation
• Cell phone
• Clothing
• Entertainment
• Savings

Rule 2. Estimate monthly costs for each: Break them down very granularly, with dollar amounts assigned to line items, such as gas money under transportation. (You’ll see in a moment that by doing this, teens see what they might have to give up in order to pay off debt. They may have to lower that whole category cost by taking the bus instead of driving a car). Have your teen or college student do this. It’s interesting to see what prices they come up with. They can research online, too.

Rule 3. Whatever the total of all monthly costs equals, tell your teen that’s their monthly revenue. The point is, all the money that comes in is devoted to one of the 10 items above.

Rule 4. Now tell them to add a separate category called DEBT. Tell them this is credit card debt. Make the amount equal to their yearly salary, in this example. Tell them that every month, they’re going to need to pay some of this debt off. I use credit card debt because it’s the most popular debt in America, and I personally believe that revolving credit is one of the worst fiscal habits humans have.

Also credit card debt is dangerous and they should know that. Nothing ruins your credit rating worse than bad credit card debt, or even carrying too big a balance for too long. These days, a big balance that affects your credit rating is $1,000. Not too long ago, it was $10,000. Talk about a barometer of the economy and how risk averse lenders are.

Rule 5. Have them roll a die, a regular die with numbers up to six. If they roll a one, they have to pay toward credit card debt from one of the categories above, and they have to pay at least $1. So, for example, your teen rolls a 1. They may choose to take $1 from the Savings category, and send it off to pay the credit card debt. They keep score by subtracting from the debt total. So, say their total debt is $5,000. Now they owe $4,999. You can have as many players as you want, and first one to pay off their debt wins.

Another example for clarity sake: If they roll a 2, then they have to take at least $1 from two categories, so maybe Savings and Entertainment. And so on for rolling a 3, 4, 5, 6. They can choose to pay more than $1 any time they want. That’s part of the strategy. Now, they have to still pay rent, and insurance, so they’ll quickly learn where they can and cannot cut corners.

Rule 6. Another variable in the game is that players can “get a side job.” Once players have paid at least $100 toward their credit card debt, they make take a turn by getting a job instead of rolling the die. The job pays twice as much as the debt they’ve paid at that point. So, for starters, their monthly salary is $200.

This is a strategy point as well. Some kids will start the game off by being reluctant to take money away from their fun categories, peeling off only a dollar at a time, minimum requirement. But some kids will quickly learn that if they drain all savings and entertainment for just one month, they’ll get a job and pay off their debt faster, which in turn ultimately gives them more money to spend and save from that point on.

Rule 7. To lower expenses: Earlier I used the example of gas money becoming unaffordable as you pay off debt. Driving a car affects two expenses: gas and car insurance. So, for ambitious players who want to pay off all debt faster and win, they may say they’ll give up driving for a while and take the bus. They need to calculate what that tradeoff will cost, and on their turn, wait to roll a 2 and give all the gas and car insurance money toward paying off the credit car. Later in the game, if they have a job and all is rolling along, they may decide to reinstate their car.

You might be surprised how this can mimic real life.

Please try this game at home, and I encourage adults to play with your teens. Let me know how it goes.

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I’m becoming one of those people. It’s not even Halloween and I’m already thinking about Christmas shopping. I used to be the person who lectured about how pre-marketing makes us spend more money, no matter how much we convince ourselves that planning ahead reduces stress and can save money because you have time to comparison shop.

But now I’m sitting here telling myself that nothing is on sale right before Christmas, but it is now as every retailer in America tries to boost pre winter earnings. Besides, it’s a tough year, and if I don’t start thinking about it now, I won’t be able to afford Christmas.

A-ha! And that’s where the thought crept in: I could create a family challenge game for the kids: Whoever saves the biggest percentage of their earnings for Christmas by December 15th wins. The percentage levels the playing field if you have kids of significantly different ages and revenue streams. An allowance-only 13 year old doesn’t stand a chance against a babysitting 17-year-old if they go dollar to dollar in a competition.

The prize is to have those savings matched. And your teens, or college students, get to keep the prize money. The savings they actually save goes to either buying presents for the family, or, depending on your family traditions, to a charity.

The game will teach them about the stock market and pacing themselves.

Now, here’s the interesting part of the game: Understanding what a fiscal quarter is. As you teach kids about the economy and investing, this concept needs to be clear. There is a lot of expectation in the real world for companies to produce on quarterly basis, and report on a quarterly basis. It helps people keep track, keeps people honest.

It’s a good habit to put fiscal quarter thinking into your kids’ lives. And this is a great quarter to do it. If you’ve been following our posts on investing in the stock market, you may know that the end of September (end of the 3rd quarter) and the beginning of October (start of the 4th quarter) are very important times in the stock market. After 3rd quarter earnings reports–what corporations have actually earned, versus what they predicted they’d earn–the stock market traditionally rises in October. Those reports are happening right now. Turn on the financial news and let your kids watch the stock market reaction.

The reason the 3rd quarter earnings are so significant is that economists begin to see what the entire year will look like. After all, there’s only one quarter left. Kids tend to think of the year in school year terms, and understanding how the calendar year is broken up will help them understand investing.

Now, they do have a natural, built-in basis for understanding fiscal quarters: seasons. Fall is the season for back-to-school, getting down to business. Same is true in the business world. So it should be a great time for savings.

To track their savings, and show them how to make most of the fiscal quarter, have them do the following three steps.

1. Keep a monthly ledger of income and expenses and savings).

2. Have them evaluate how much they’ve saved at the end of October, and come up with ideas how to save more. Another odd job? Less spending?

3. At the end of November, have them compare their saving performance from month one to month two. Then have them set an accelerated goal for the last two weeks.

4. Have them compare their last two weeks to the rest of their fiscal quarter. Did they save more at the end than at any other time? Chances are yes, and you can explain that businesses tend to have the same patterns toward the end of a quarter, often because they’ve spent their budgets. Or, because they want to make their numbers look good.

The point of this exercise is like the point of sports team drills: how pacing yourself, and then examining performance, can actually enhance performance. Fiscal quarter thinking can translate to a lot of life issues.

They can play this game with school work, for instance. If they take their worst subject, say math, and decide they’re going to make an effort to improve their performance in one fiscal quarter, what would they do? Spend an extra hour a week working on it? Getting a tutor? Joining a study group? Going to teachers’ office hours?

They can try something for the first month, see if the grades they’re getting improve. The next month, they can add more effort, see what the yield is. Like long distance running, at first it’s pacing, and by the end it’s pulling out all the stops and going for whatever your goal is.

Most teens procrastinate and then cram. That would be like doing nothing to boost earnings–or savings–until December 1, and then gunning for the last two weeks.

That’s what I did in school, and many adults have those habits. If kids think like businesses have to, they will plan their time better for everything in their lives.

I would love to hear back in December if anyone tries this Q4 Savings Plan.

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No contest, the worst nightmare of a class I ever took in college was accounting. I’ve never felt less competent in my life. No matter what I did, I couldn’t muster the confident state of mind needed to assimilate information and find my own style with the work. Looking at a ledger made me freeze.

Now I try to remember that on days when I don’t have much patience or sympathy for my students. There are simply concepts that can be difficult to grasp at certain ages. I look at a ledger today and I don’t see what my problem was. I even think in terms of revenue and expenses when I try to assess any monetary situation. When I’m stuck, the accounting process helps me to be decisive. That’s the great thing about accounting; a simple majority always rules.

And therein lies the whole point of teaching your teens and college kids to go beyond just setting up a budget (see Budget post) and keep an actual ledger, before they ever take an accounting class, or instead of one. Later in their lives it will really sink in. With some kids, it will sink it immediately, so even better. If kids can apply the ledger concept right away, they will be supremely organized little monetary beings. My brother was one of those.

First things first in the ledger lesson: Tell the kids about the real-life applications of keeping a ledger, which they’ll experience immediately: 1) They’ll be able to maximize profits from whatever summer job they have right now (or even just allowance). 2.) They’ll be primed to create a balance sheet next, which records assets and liabilities. A balance sheet, which I’ll cover in another post, is the chart they’ll need when they’re ready to buy investments— such as CDs, stocks, mutual funds, bonds— and understand how they fit in to their financial profile. I will be covering investments in the next few blogs. 3) Last and most compelling: They’ll have a new way at looking at decision making, which, among other things, will make them very compelling coercers.

If I had ever understood accounting when I took the class, I would have used it to manipulate my parents . Think how much more compelling your teen’s argument will be to spend money on a big ticket item if they can demonstrate the rationale on a ledger. Tell them that!

Now, the steps to creating a ledger, which is all about getting granular with your budget, looking at it as one picture, seeing how the revenue and expenses are related. With a budget, and even line item tracking for their checking account debit cards, they see expenses as they scroll by. They create lump sums in categories. They know when they’re broke. But with a ledger, the details come to life, and there may be creative ways around certain details.

For instance, in a budget you simply have a lump sum for tuition. In a ledger, you’d detail the different aspects of tuition, if there any. Cost of class, cost of textbooks, cost of any student fees. When you get granular, you may find ways around certain costs. Even if you’re not running in the red. The goal may be simply to reduce expense. If the total textbook costs kept jumping out at me—and they would because they’re exorbitant—I’d get annoyed and start actively looking into used textbooks, which is a growing market.

This lesson assumes they have a checking account with a debit card, and a general budget they’ve created.

1. Get them an official, standard accounting ledger form online, one which you can edit. Don’t make one up. Use a real one, with a revenue/expense paradigm. The form can be a simple generic practice one, or your QuickBooks, or one our financial institution offers.

2. Have them go through their budget, with a computer screen open to their debit account, so they can see their expenses in line item form. They need to make line items, on the ledger, for each category. For instance, it’s not enough for them to put a dollar amount on weekly entertainment expense. They need to itemize it—movies, junk food, concert, etc. How they spent every cent. That’s why the online debit card tracking screen is so important. It’s too laborious otherwise. Then put all of this into the ledger.

3. Have them balance their ledger each day, in the evening, for one month. I know that sounds like a lot, and the debit card tracking does enter it online, so they could just grab the data once a week. But daily is a great way to form a habit. Tell them to time themselves, and just spend 5 to 10 minutes on it. Out of all the lessons, this one is perhaps most important. If you keep a quick eye on your money each day, it will never overwhelm you. Up the ante by being Pavlovian about it. Give them something they like while doing it—a favorite soda, candy. Does that sound terrible? Probably. But I’ll tell you, I eat chocolate covered espresso beans, my weakness, whenever I have to do my books. It helps. Quality of life, I always say. (My husband always suggests a cold beer, which is why he’s not allowed near the money.)

4. At the end of each week, sit down with them and ask what they think about how the week went. Don’t lead the witness too much. Just ask what they think about it, if they would change anything. My guess is that they’ll want more revenue. Just nod at first. Don’t start to make suggestions. Let them want it really badly first. Wait the whole month before making life change suggestions. My guess is by the end of the month they’ll be making the suggestions, and that’s when the whole lesson pays off. That’s the true goal.

5. At the end of the month, change one thing on each side of the ledger for the next month. Cut an expense, and mow an extra lawn for the revenue side. Use their suggestions, otherwise offer them. It’s fascinating for them to see how just one life change can make a difference.
It’s a great life metaphor too. You don’t have to be overwhelmed in order to make changes in your life. In fact, it’s often most realistic and lasting to change little things, one at a time.

Please write in about experiences teaching accounting, and if you have questions along the way, ask them here. I finally do know how to conquer a ledger!

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Let’s leverage the news, shall we? Ask your kids if they know what a budget deficit is. They’ve seen the headlines. Tell them they need to know because it’s the reason the recession is going to take longer to end than anyone would like.

Ask them if they want a personal recession in their own lives, one that follows them around for decades, or would they like to have a harmonious, prosperous relationship to money.

You not only need to teach your college bound kid to create a budget, but your teens need one, too, so by the time they get to college they’ll be ahead of the game—or at least not behind. So if you have both college students and teens in your family, don’t spare anyone.

Summer is the perfect time because you can supervise. (I love supervising.) Here’s the budget making plan to do with your kids.

1. Okay, first things first. The glossary of terms:
Budget deficit: When what you spend is more than what you take in. Bad.
Budget surplus: When what you spend is less than what you take in. Good.
So they know what the goal is: A budget surplus.

And don’t let any of your smarty pants kids tell you that certain economists don’t believe a budget surplus is good for the nation because it holds up lending etc. Tell them a balanced budget is bad for individuals because you’ll never get to buy any of the really good stuff—cars, exceptional electronics, fabulous vacations.

2. Play one round of Budget Surplus Trivia. Ask your kids to guess when the last time was that the U.S. government had a budget surplus. Then have them Google the question. They’ll start reading, find out it was 2000 under Bill Clinton, they’ll read a little more, and then you’ll have them ripe for creating their own budget: Nine years and counting, and no sign of a balanced budget, much less a surplus. The deficit is widening. Tell them if that happened to an individual over such a long period of time, they’d be in so much debt, with no money to pay it off, they’d have to file for bankruptcy, which ruins your financial life. Always a good idea, I think, to bring the news home.

3. Get a simple budget software program, or if your kid’s checking account has an online budget program, they can use that. I do recommend that every kid doing a budget has a checking account with debit card, so they can use the online line item tracking. It makes the whole budget concept come into focus, and stay in focus.

4. Creating the actual budget. First, have the kids write down life expenses. Here’s the list:

1. Tuition
2. Rent
3. Debt
4. Taxes
5. Utilities
6. Phone
7. Insurance
8. Car payments/transportation/gas
9. Food
10. Clothing
11. Health/Fitness/Grooming
12. Entertainment
13. Savings

Now, even though your teen, or even your college student, won’t have all these line items, make them include all them anyway. These expenses are coming for them in life at some point, so knowing the spectrum now is a good thing. Just have them put zeros for the things not applicable. Maybe by the time they’re in the budget habit, they’ll want to keep that Debt number at zero.

Another interesting exercise is to have your kids put them in order of importance. Write down the different items on index cards, place them on the table. Have them order them according to priority. They should, of course, come up with Entertainment at the bottom, and not, say, before Rent.

5. Then have them write down all the sources of income per month. You may well be a source of income, specifically earmarked for certain items. For instance, if their college apartment rent is $200 per month, then you are counted as the source of rental income.

6. Have the kids go at it. First, they have to put the earmarked income next to the appropriate line item, creating a zero balance. Next, the leftover lump of their income—just allowance, allowance and a job, whatever it is—is applied, as they see fit. Most of this will be discretionary income, for entertainment and savings, upgrades to certain line items, such as a cooler cell phone. Explain what discretionary is. That’s your spending money.

Have the kids think of creative ways of using discretionary income to make their money grow. This is where Saving Wisely comes in.

7. More revenue, less expenses. When they have their budget finished, they’ll see whether they’re at deficit, balance, or surplus. Deficit means parents are supplying the gap, of course, but do explain that without that safety net, they’d be going deeper and deeper into debt, if that choice is even available to them. Credit is harder to get these days.

So the final exercise is to have them see where some expenses could be cut, either to reduce deficit or to increase savings, which is not just for earning more money, but also to buffer emergencies, in case some other revenue is lost, or a new expense comes into play.

And, of course, could they earn more money to enhance the revenue side. This may not be possible, given school load, but do show them that being a good earner goes a long way to peace of mind, but only when you have a smart approach to expenses.

I do guarantee this process will be sobering for them, and make them thoughtful. Some may argue that it’s too much stress for them. I don’t think so. We’ll be lucky if they don’t forget all about it two hours later, knowing the safety net is there. And check out this conversational guide to teen budgeting. It will help shape your process, and theirs. Have teens do the budget for all three months of the summer, and then keep it going.

Any other budget ideas out there?

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To me, summer means teens wanting to borrow the car constantly. They borrow the car and deliver it back with the gas light on. It’s more than annoying. But it’s a chance to sneak in a money lesson for one of their most revered commodities: gas money.

Gas money equals freedom—whether it’s your car or their own— and it’s compartmentalized in the teenage mind: It never occurs to a teenager, or many college students for that matter, that the money they use to go to the mall can also be used to gas up the car. The reason is simple. They know they can finagle a way to talk you into the gas money, especially if it’s your car. But even in their own car, if you want them to do errands, they’ll get the gas money out of you, then fly off to do what they want, that loaf of bread you asked them to go get arriving back at the house at 11 p.m.

So, let’s turn the tables a bit on all that. Gas prices are sneaking up again, and even if it doesn’t seem like it when teens are nickel and diming you for three dollars here, five dollars there, gas money adds up. They need to take some responsibility for it, especially when it translates so directly to their freedom.

I had no idea what to do about fixing the gas guzzler problem, until I happened to be complaining about it to my mechanic, and he said: “Try driving the speed limit.”

First of all, how did he know I have a lead foot? Well, apparently the way my tires are worn tell him the whole story. He’s the Columbo of cars.

But then something occurred to me: Are there really things you can do, like driving the speed limit, that conserve gas? Indeed there are. Here’s my mechanic’s short list: Check tire pressure regularly and make sure you have tires filled to the recommended air pressure. Drive the speed limit. Keep clean oil in your car, and don’t let it run low. Don’t run the air conditioner. Don’t drive in heavy traffic if you can help it, and use less congested roads, with less frequent stopping and starting

So, what I decided to do was give this list to teenagers. The goal: to raise awareness about gas money, and get them to take responsibility for the expense.

Here’s the plan:

1. Tell them to keep track of how much money they spend on gas for two weeks.

2. Then have them do the all the things on the mechanic’s short for the next two weeks, and track gas expenditure again. This time, they have to pay for their own gas. I especially like the speed limit one. It’s such a great way to con them into being safe. The one that might be hard, depending on where you live, is the air conditioner one. And that’s a good thing. Don’t worry about your suffering teen. We need to raise awareness and discomfort does that job very well.

3. If they’ve saved money in the second two weeks, give them a bonus, such as gas money for a week. There’s a real side benefit to giving them a lump sum of money in advance, earmarked for gas, rather than every time they go out. They have to pace themselves for a week, which raises awareness, too. The next time they slip a hand into their jeans pocket, rummaging for a couple of dollars for a slice of pizza, the thought will pop into their little heads: Is this my gas money? The idea that money is money, and there’s an opportunity cost for spending it, is a great lesson.

You may be asking what is the point of giving them gas money as a bonus, if the whole lesson was designed to prevent you from being the gas money ATM? Because if they think they’re going to get free money, they’ll keep being careful and conservative. They’ll decide whether they really need the air conditioning on. Awareness is the first step toward forming a good habit. After a while, the good habits will stick. Plus, the very fact that the cost of gas is their responsibility will be instilled—we can all hope.

If you have any more tips about car care that translates to better gas mileage, please share them.

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I know you think this sounds like a joke, but it’s not, especially for parents out there with boys.

Wait. My husband is yelling that I’m sexist from his dent in the sofa. (That’s what I call the area he has literally worn a huge dent in from overuse. You could trace it with chalk, like the police do at a crime scene, and see an outline of his laying down body).

I’m not being sexist. I’m just an immovable realist. When boys and girls date, and the boy is interested in more-than-a-friend way, he often wants to treat, and the pressure is still here, in 2009, for him to do so. Now, sometimes the girl will jump in and offer to pay for herself, or treat next time, but the discussion is still there, and the possibility of one person’s allowance bearing the load of the entire bill is the point here.

By the way, the advice I will eventually get to in this blog is not just for teenagers. It can apply to your college students as well.

So now that summer is essentially here, there’s a lot more going on, going out, and all of that costs money. What are the rules for extra money for your kids, when it comes to dating and all the added activities summer brings? Sometimes, it’s a matter of you handing out more money so your teen can go dutch with a date to all sorts of events, like fairs, after that week’s allowance has long run dry.

Okay, the 4 ground rules of dating:

1. If your teen has an allowance, not a job: You probably need to insist that he or she not treat other people, even if they can’t live without them. Really, before you simply pitch in for the other kid, who may well break your kid’s heart by the end of the summer, think about it.

Say your teenage son finds it embarrassing to be unable to treat. Guess what he can do? He can get a job. It’s a great way to teach a lesson about affordability. If there aren’t suitable jobs available in your area, give him some real labor to do around the house and yard—things that you really would be paying someone else to do.

2. If your teen has a job, and wants to spend every cent on the girlfriend: You may have a variety of feelings about this. Weighing in from the dent in the sofa, my husband, who seems to be particulary amused by all this, thinks that’s fine. He has that “let the kid have fond memories of a summer love” attitude. Of course if the kid must help pay for his college, he can’t afford that fantasy.

In any case, I’m way too uptight for that. Think about insisting that your teen put a portion of those earnings into savings. And not just because the girlfriend may dump him by the end of summer, but because they’re not married and he should be saving some money. (see my post about Saving Wisely).

Offer to match the amount he’ll save as incentive. It is true that the desire to treat a loved one is gracious, so you don’t necessarily want to squash that urge, just temper it.

3. Teach teens how to talk about money to the people they’re dating. This is harder for teens than it is for college students, but you know what? It’s hard for everyone, including adults. If they can learn to have honest conversations about money at a young age, they’ll be way ahead of the game.

It’s important if one of the dating couple has a job and the other doesn’t, or if both don’t, or even if both do. It also prevents anyone from feeling like they’re being taken advantage of. Tell your teen that bit specifically if they look at you like you have three heads when you suggest they speak to their brand new love of their life about “being cheap”. (Yes, that’s a quote).

So, what they need to do is talk to their date about how they’ll work out the money part of their relationship. It’s so much pressure at that age, this is what I suggest to teens, and even college students– and please chime in with any other ideas:

Tell the person you’re dating that in an ideal world, you’d love it if money didn’t matter and you could treat them all the time. But you’re just not in that place in your life yet. So, can there be the assumption that we’ll share the expense of the things we do, unless one of us says specifically that they want to treat for this.

It doesn’t have to be awkward: Let’s say they want to go on a boat trip, but one of them, or both of them, don’t have the money. Say to each other: How can we plot to get it? (Let them plot together to hit you up for it. As long as they’re sharing the burden of making it happen, the plan is working.)

Very important here: If one teen has a job and the other doesn’t, you need to tell the teen with a job to be sensitive to the other person’s ability to afford an outing before suggesting it. Hey, this is great advice for adults, too, so use examples from your own life.

My husband and I have really good friends who simply can’t afford much right now. So when we want to splurge on an expensive restaurant, we don’t ask them to join us unless we’re prepared to invite them as our guests. And still, you don’t want to insult someone’s dignity, so it better be a special occasion. I tell these stories to kids all the time, and it helps.

I also tell them the reverse: It’s okay to tell someone you can’t afford to do something, can we do something else? I do that in my own life. I have to reign in wealthy friends from time to time. The less energy we put into the embarrassment, the better.

4. Say both your teen, and the person who’s attached to their hip this summer, simply can’t afford to go to special events, and you want to help. Before you end up just treating them both, give them a chance to earn it together. Got a younger kid you’d like babysat for an afternoon? Ask them to let that kid tag along for a day—which could be fun for them anyway—and in return you’ll treat the concert.

Good luck. You’ll need it. And please share teen dating stories!

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Regardless where we stand on how much privacy and leeway teens get with their allowance, some parameters must set or you’re going to be nickeled and dimed to death before you know it.

Teenagers are master manipulators when it comes to money. That’s why it’s such a good age to teach them sophisticated money lessons. When I watch those crafty little wheels spin I know there’s no need to wait until college to teach kids finances.

Here are 4 decisions we all need to make. It’s less important what those decisions are than the fact that they’re made, and put in writing. Make the decisions with your teenagers, have them take the lead, have them write it down. You can both sign it. They’ll take ownership of the contract, and you won’t get into arguments later.

1. Depending on your household economic situation is, decide if allowance is purely spending money, or if it must contribute to the household. If it’s affordable, I would encourage that it’s just spending money. If they earn it, having a certain freedom associated with it is a great motivation builder for being a good earner.

Make a list of what they’re expected to pay for with their allowance. This will also help you set the price of allowance. For instance, if you still pay for activities—movies, concert tickets, going to a fair—and they only pay for products they want, then a dollar for each year they’ve been alive might be okay. But if they have to pay for the movies, or entry fee to a special event, then they need more money because it’s expensive to do those things.

Make a list. Have them come up with the list once you decide the parameters. For instance, tell them that they’re responsible for all the products they want to buy and are constantly asking for. Having them make a list of them makes them really take a look at what they want so badly. Their priorities might change.

2. Rules for what parents pay for. Same drill as #1. You write down, while they witness it, what you’ll continue to pay for.

Danger zone: You can include food, water, shelter if you want. I actually advise against that. It can hurt their feelings and create distance to send teenagers the message that they’re all grown up and it’s a burden to house them. To reduce your cohabitating relationship to a business arrangement with an adult is quite a comment on intimacy. I hear this advice and, honestly, guilt trip, a lot, and I think it’s dangerous, even if the intention is good—to not coddle, to teach them hard lessons about the realities of the world and what things cost; to keep them from being bratty and demanding.

But there are other ways, and here’s what scares me about the “I put a roof over your head” approach: The reality of our world is that there’s a lot of danger to teenagers. We all know this: drugs and promiscuity cause disease, among other things. They’re at an age where they must rebel—must go through a stage of antithesis, in order to grow. Early childhood is the thesis statement of life; you are a product of your parents. Teenhood is the antithesis, where you rebel to see the world differently, to test your independence, which is vital to self care later. In adulthood, we reach synthesis, which is who we end up being. It’s probably a mix of where we came from and what new things we took on.

If, as a parent, you create too much distance during antithesis, then you run the risk of teenagers never confiding in you. When they rebel, they might run to extreme decisions to feel independent. I’m not saying that there’s a direct corollary between the roof over your head speech and teens doing drugs. But I do think that they are far from grown up when they’re teens, and the message that they owe you as if they’re adults will prevent them from coming to you for emotional parenting when they need it the most.

I want my daughter to confide me when she’s thinking of having sex with a boyfriend, or if she wants to try something potentially dangerous, or if she’s not in any shape to drive home and needs help.

So I have to say go easy here to teach lasting, productive money lessons. Money is something so many adults have anxiety about, and I have to say I think some of the anxiety comes from lessons they were taught as teens. Start out small, with the discretionary stuff, see if they are becoming more responsible just from this approach.

You can’t really go wrong arguing about who pays for concert tickets and who pays for the ridiculously expensive jeans your daughter must have. If you make the lesson about the goods and services the teenagers are interested in, they’ll be interested in the money lesson. And that’s more than half the battle.

Try at least to save the roof over your head until all else fails.

3. What is the division: spending, saving, giving to charity? Please do check out my posts on Spending Wisely and Saving Wisely for tips on how to spend allowance. But before that, do decide if all the money you give teenagers is for spending. If you can afford, up the amount each week—at at least $25-$30 and use the opportunity to really teach some money lessons that include investing and helping others.

If you do, definitely get a reloadable prepaid card for your kids. Load the money on each week, and then have them deal it out to spending, saving, and charity. I’m personally a fan of the triumvirate. My daughter has donated to saving animals with at least some of her allowance since she was 6.

Now she thinks about others, is the first one in the house at Christmastime to go in search of clothing and games we no longer use to give to Toys for Tots, Salvation Army, Goodwill, and the local shelters. Very important money lesson hidden here. Take your kid to churches or other donation spots when you donate. Show them what it’s like to live without means.

4. When do teens get extra money?

I’m a sucker for certain things, I admit it, so when it comes to things like proms I not only agree to pay for the dress or suit, but all the acoutrements—the jewelry, the gas for their car if they have one, money to go out with after, the corsage.

I actually think you don’t tell the kids this part. Surprise them on special occasions. Treat them when you feel like it makes sense, or when you can afford it. My daughter recently went to a charity dance for the SPCA (Society for the Prevention of Cruelty to Animals). She not only gathered up her allowance that week, but dug out everything she had hoarded in her “spending purse” and was prepared to bring every cent she had on her person to that event. In the car, I told her to put her money away, I wanted to make the donation on her behalf. She donates a lot. She agreed to let me pay half, but she wanted to give some, too.

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