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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As the Secretary of the Board at a private school, of course I’m hearing more and more stories about parents struggling to pay for private school (see Private School Bailout post). But what I’m also starting to hear are creative ways people are coming up with to keep making those private school payments.

It’s inspiring, especially the cases where the teenagers whose education is at stake are proving to be incredibly resourceful. There’s one case so striking that I’m starting to believe we should all set our teenagers to the task of playing treasure chest detective.

Let me explain: The principal at the school where I sit on the Board is an exceptional human being. He took an old Jeep Cherokee in lieu of one student’s tuition, because the math-smart kid was blossoming at the school, after a tough time in a public elementary school. Of course word spread, and the joke on our campus—and it’s a beautiful campus, open fields against a mountain backdrop—is that soon people will be bringing in goats.

So one parent called and said her daughter, 16, had spent the entire weekend in the attic, taking inventory, wondering what she could try to sell on eBay. Her mother didn’t have the heart to stop her; she was so organized and industrious, so mature in her thinking that goods could be liquidated and put to good use.

So the girl finds these gold coins that the mother had all but forgotten about; they had been handed down from grandparents, not wealthy ones. At second glance, and after much prodding from the teenage daughter, the mother called the school. Our principal referred her to another Board member who happens to deal in antiques. One of the gold coins was worth $59,000. And there were several of them. The teenager not only saved her private high school education, but found her college education as well.

This story gives me goose bumps because it’s in the fairy tale realm, but it’s also true. Yet I hesitated telling it to the kids in my life because it could be disappointing to send them on a mission that will never result in such glory.

Still, I couldn’t shake the thought that systemizing what that 16-year-old girl did would be of great benefit to any teenager. First of all, taking inventory of family valuables teaches kids to assess a dollar value for goods— a great skill applicable to so many things, from comparison shopping to being responsible about taking good care of valuables.

Even the act of going online to determine what something is worth by finding comparables that have sold is a great skill. And of course just knowing what things in this world cost, and how quickly they lose value, is important.

Want to teach the kids something? Have them look at what your car cost new, and how much its value dropped to the minute you drove it off the dealership lot. It will help them learn how to spend wisely, assess what they really need versus want in goods and services.

So, I decided to give kids a chance to flex their research muscles while earning a commission. First, they assessed the goods in my house. Then I sent them to my brother’s, and other relatives willing to participate. They were allowed to set up an account on eBay, and they got a commission on whatever they sold.

eBay requires the seller to do a lot of monitoring, so it enforces the lesson of following up and following through on things. Of course the commission keeps them motivated. Teaching them eBay also teaches them how to deal with online transaction settlement, which of course leads to the question of what to do with their commission. I think setting set them up with a reloadable prepaid card is a great idea. In some cases, the stuff they sell on eBay can be paid to their card, and then they can take out cash to pay the seller, keeping a commission. They end up running a business.

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You’ve got a three-month plan in action. But you need more. A one-year plan, as in: If your financial situation hasn’t changed in one year, you should have the following in place. Some of these items, in order to achieve them within a year, need some planning now, and along the way. As usual, some may apply to you, some may not.

My number one piece of advice about these one-year changes: Keep them from the kids for now. They may not happen, so why cause undo stress, or in some cases, disappoint them?

1. Put your house on the stealth market. Don’t have a fire sale, don’t give away your property, don’t even advertise to your community. But put your house on the market and see what happens. And I’m talking about doing it now. No sign out front, just a deal between you and a realtor and their listing process. If you do it now, you won’t be freaking out later. And if you get an offer, think about it, and if it takes a while, so be it. You don’t want to be putting a house on the market the moment you really need to. You want to do it long before.

Regardless of what echelon of the housing market you’re in, sometimes the stealth on-the-market house has cache. Sometimes you’re right in the path of someone downgrading and can get a good deal. In my neighborhood, there are a lot of New Yorker expatriates who consider my house a big step down and therefore a savings. I’m keeping that information close to the vest in this economy.

Remember, it’s Spring time, so people with kids who need to relocate want it done over the summer. That means finding a house now, and closing by June.

Putting the house on the market now also gives you opportunity to think of clever ways to market it, in coordination with the realtor, and on your own, via blogosphere outreach. In my upstate New York area, there is the New York City market, but also Southerners and Californians who may need to relocate for work and don’t want to live in a city, but close to one. You may put feelers out to people you know across the country, via work networks, social circles, and social networking.

2. Look for jobs out of town. In the same vein as putting your house on the market, and in fact while you’re at it, look for jobs out of town now. Start a worldwide search if you’re adventurous, and call headhunters—the works. Inviting opportunity never hurt anyone. You can always say no. Different areas of the country are of course affected differently by recession, depending on the ecosystem of the state’s economy.

For instance, in Washington, D.C., the unemployment rate outranks the national average right now, at 9.3%, but it’s a tri-state area, and neighboring Virginia and Maryland are at 6% and 6.2%, and their populations serve the D.C. economy. Government, the military, medical, and technology industries there still afford opportunity, especially with a presidential administration that just opened up stem cell research and gave the nod to green tech, both growing fields. Medical technology is a huge, growing industry, with roots there as well.

The great thing about out of town jobs is you can rent a place based on your income, and if your house on the market isn’t selling right away, you can rent that out, too. Or at least try. You can always keep a house on the market while you’re renting it.

3. If you’re a do-it-yourselfer, start a green upgrading side business. I have zero skills for building or fixing things. Neither does my husband. We’re praying that our daughter chooses a useful life path like carpentry or medicine so someone in the family knows how to do something. If you have skills, even if you’ve never worked at carpentry or related vocations professionally, there is one growth area in the contracting field: Energy efficient home upgrades. People who purchase solar or geothermal units, tankless water heaters, pellet stoves, and other such items get a 30% tax credit. There’s no cost limit, either. There are still wealthy people out there, and since ultimately these conservation changes save money, aside from the tax break, there will be a demand for purchase, installation, and service of these systems.

You can either look for jobs with a contractor who specializes in green home upgrades, or start your own business. There may even be small business loans or grants to get for this sort of business. Look into it. Don’t be scared off by the news. Check out energystar.gov and energytaxincentives.org for information on which installations give tax breaks. Market yourself to wealthy communities.

4. Plan to sell a car. This is not one to do right away, but learn the ropes of eBay. My mother sold her car on eBay, which I promise you means anyone can do it. And she got a better price than any dealer offered her. You can tell everyone in town you’re doing it to be green.

5. Take a loan from family members. This isn’t always an option, but if it is, don’t be ashamed—or try not to. Drink a glass of wine before you make the call, whatever it takes. But also don’t wait until you’re desperate. It puts too much pressure on the person who would be lending the money to you. A desperate person never seems like they can pay it back. It’s psychological, for sure, but nonetheless can be true. And when you’re not desperate, you can think through arrangements that make everyone feel better, like repayment with interest.

6. Borrow against equity in your house and insurance policy. If you have equity, borrowing against your mortgage is just fine to do, even to pay for college. It won’t be forever. There was a trend in the early 1980s where wealthy people paid for college by taking equity out of their houses, investing it in equities, and paying for school and loan repayment with earnings. It is your capital. Just give yourself strict terms with the money.

Buyer’s warning: Don’t let anyone talk you into a reverse mortgage if you can help it. With lifespans these days, I wouldn’t recommend a reverse mortgage for anyone under 72. Even then I’m skeptical.

7. Look at state health insurance programs for your kids. These can be tough to qualify for. Many families, even with layoffs, come in right above the income and asset requirements. But look into it soon, because it’s a bureaucratic system and can take a while to wade through.

Stay tuned for my next post, which is what to do if you need to move your kids out of private school—Private School Bailout. This could be included in the one-year plan, but it’s quite a process, a plan of its own.

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This 3-month plan is about making a few significant changes, and preparation for more possible changes, before things become too big of a problem. The idea is to do whichever things on the list apply to you, and see how it’s going in three months. I suggest using this plan in coordination with the one-year plan, which is PART 4 of the Laid Off series.

The reason not to tell the kids about this plan: I subscribe to the school of thought that kids shouldn’t know every single adult thing going on in the house and in the parents’ world. Now, for college kids, it may be harder to hide, or even intuitive, tuned-in teenagers. Actually, teenagers are often more likely to figure out secrets being kept because they’re home and are phenomenal eavesdroppers.

Nonetheless, do try to keep potentially painful life changes to yourself for as long as possible. Worrying about an uncertain future will have an effect on kids’ school performance and well being. The more stable they feel, the more relaxed you’ll be executing some or all of the following ideas over the next three months.

1. Start looking for various jobs that aren’t your expertise. An 80-year-old scientist I know, born in 1930, said when he was 8 years old his father, also a Ph.D. in medicine, taught him to be a brick layer.

“It’s important to have a recession proof skill in your pocket,” his father told him.

Brick laying may not be recession proof in this bad housing and construction market, but the point is the same. Apply for jobs that are “beneath” you. This man’s attitude is perhaps the most important part of toughing out a bad economy: There is no shame in working at something you weren’t schooled for, or aren’t a pro at. The loss of your job isn’t your fault, or an indication of your ability to provide, to succeed. It’s just a tough time. If we can all accept this—and I will be the worst at it—then we will not just pull through, but have the opportunity to experience something different, get a fresh perspective.

It won’t be forever.

The reason not to tell the kids about your odd job hunt is that they have more calm wrapped up in your identity than you think. If they feel like you’re applying for jobs they might apply for, it will worry them. No reason to tell them until you actually start working at one. For now, it’s simply covering all your bases, reaching out to as many opportunities as possible. Part of this could also be reaching out to your network of business contacts and friends, and seeing if they need any sort of work assistance.

2. Sell Things. This is the era of eBay, and if you aren’t familiar, now’s a good time. It’s a great revenue-finder even in a good economy, but it takes time, and mental bandwidth, to keep up with it. So it’s a perfect project for the out of work parent, who can focus on setting up an account, monitoring and marketing the products, and bringing in some revenue.

But don’t go straight for the family jewels. Take inventory of your whole house and any storage facility first, and then do market research, see what’s out on eBay that’s selling. You’ll be surprised; you’ve got more than you think. A quick inventory at our house produced these items: an in-wall air conditioning unit we somehow purchased and never used. A piece of exercise equipment I couldn’t tell you the name of if I tried: It looks like something Dr. Seuss would build—the one-man band of working out. It rows and you climb or cycle or bend and twist. Anyway, clearly one of my husband’s purchases. I think he pinched his finger on the computer module the first time out and never used it again. A late ‘90s purchase, when the NASDAQ was at 5,000 and the Dow at a steady 12,000. His saving grace is that he kept the manual, even though he’s never read one of those in his life. But if you have a manual, you’ve got a model number. And if you have a model number, throw it up on eBay.

You’ll make money and clean out your basement, attic, garage, storage units. I think you get Feng Shui extra credit, too.

3. Don’t run from creditors. Call them. Take a look at reorganizing credit now. Even if you’re a person who normally doesn’t revolve credit, the next few months may place new demands on your habits. So, before you slap things down on the card you have, look at the interest rate. Yes, good offers might be harder to come by now than they were before, but they’re out there.

If you do revolve credit and are worried about getting maxed out and buried under interest rates, then definitely shop around for a new card. Also, speak to your credit card issuer about a payment plan before it becomes a problem. That’s the way to protect your credit rating. The same goes for outstanding medical bills. Call them, be proactive. This alone will reduce stress a great deal.

4. Get some advice before doing your taxes, if you haven’t already done them. If you owe taxes for 2008, then you may want to get advice about a payment plan with the IRS. If someone has lost their job, there are payment options available.

5. Become a part of a medical study. If there is a teaching or research hospital near you, you may be able to become part of a medical study. They often pay people to participate. Now, I know it sounds a little Orwellian at first, but it’s not always about being a guinea pig for a new Big Pharma drug. Sometimes there are sleep studies, nutritional studies, studies that link behaviors to health or illness.

Does anyone have any three-month plans to share? And please share your stories about layoffs. Who knows what advice or leads may come our way if we share.

And for all you single parents, PART 3 is for you. Check back on March 19^th for the next installation.

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I have grappled with this for a long time. So far I’ve dealt with the question in this mature manner: by avoiding it. I’d happily continue to do exactly that, but I’m afraid that won’t be possible for long in this economy.

The whole “how much money do we have” issue is simply looming too large now. If your kids aren’t asking you, their friends are asking their parents. It’s coming to your house sooner or later. At best, we are two degrees of separation away from facing this question. I, for one, don’t want to stare blankly without a prepared answer when the kids strike.

And as we delve into teaching kids about managing money, making a decision about telling them takes on new importance. The fact that we touched upon this issue the college tuition hike blog was a sign to me. (I noticed that when I referred to it, I found a way to circumvent telling them and still teach the money management lesson. That was not premeditated.)

Time to make the decision. Okay, so first of all, what are the benefits of giving the kids the bottom line?

1. They get a realistic picture, and then the lessons you teach can be very number-crunching specific. It’s good for the overall skills of money management, computation, and problem solving.
2. They feel trusted with the information, and perhaps they have ideas, or will adjust their behavior in some way, on their own.

I was sitting here trying to enumerate more benefits, when the negatives starting screaming quite loudly in my head:

1. They can get scared, in a free-floating anxiety way, which can be too much burden on them, when they don’t have the capacity to handle it yet. I don’t want to teach them fear associated with money management. That just makes people avoid the issue. On the contrary, it’s a level head I’m desperately trying to cultivate.
2. They might not think much of you after they know. If they read entertainment and sports star news, your salary may not compare with their heroes’ incomes. Now, while this may not seem that important at first, your authority as the family money manager needs to be absolute in order to teach them. If they decide, “You can’t teach me!” you’ve set yourself up for big problems.I distinctly remember the time in high school when I found out what teachers make. During that adolescent period of rebellion and disdain for adults, the low number made me think less of them, and myself as potentially superior. (Fitting that I now teach. Karmic payback.)
3. They will tell other people. My daughter can’t keep a secret for more than two hours if it’s a really good one. You can visibly see her start to burst at the seams.

Please add more pros and cons here. This issue is like nature v. nurture, there’s no limit to the discussion!

I think the answer, really, is very individual. For my part, I am holding off revealing the entire truth for now. But, I do think for certain exercises in teaching money management, you need dollar figures. What I think I’m going to try is taking a dollar amount, telling them it’s a portion of monthly income (no need to tell them what portion). Then they can use that number as budget for a finite number of items.

For example, I’ll say, for the family budget lesson: We have $3,000 per month to divide among six payment obligations. How should we allocate the money? I’ll give three givens—recurring amounts, such as the cable TV price, monthly car insurance, and monthly health insurance—and leave them three variable amounts to play with. I’ll give them three categories to fill, such as groceries, gas, and clothing. I’ll make sure to say that’s not an entire budget, or revenue stream, but a sample set. (My motto: Speak in math class terms as much as possible).

The same principle—using a sample set dollar amount—can be used to teach buying investments, which we’ll do in an upcoming blog. (Now is a great time for certain investments, such as retirement vehicles). I think I’ll say: “I have $20,000 I’d like to earmark for investment. How much would you put in a CD (and what term CD), how much in a college fund, and how much in longer term retirement?”

Now, what if they ask me what my salary is directly, looking me in the eye? I can always say it varies, because I write, I teach, I do speaking engagements, and some consulting. But there’s also something to be said for being very direct, either way: “It’s a private matter, and I don’t wish to reveal it right now. Or, it’s X dollars.”

What are some thoughts out there on full disclosure, and how to handle it?