My husband of course wants to know why all my New Year’s resolutions involve him. I hate it when he’s perceptive.

If you are a masochist, you can make this New Year’s resolution about yourself, but I say why bother.

So here’s the plan: We all have some things we do that waste money and that are terrible habits. Here’s one of: I always return movies to the video store late, and run up late fees. I can’t seem to stop this. Drives my husband nuts.

Here are a couple of his: He’ll buy a shirt without trying it on, and then hate it. But will he return it? No, he’ll let it sit in his closet until he drives me bananas and I return it. (Yes, we all know that I’m enabling his behavior, but he knows I can’t help but return it.) He will go to an ATM that’s not his bank and incur a processing fee for taking money out. He’ll do this even if his own bank’s ATM is close by.

Here is the challenge for your teen: Have them interview your spouse–or, sigh, okay, it can be you–and find at least five money wasting habits. Then have them track your or your spouses behavior for those habits for one month.

They should make a weekly chart that shows how much money is wasted. Each bad habit is a line item. Next to each item, they should have one column for money wasted, and one column for money saved.

Your spouse should improve over time, with awareness and scrutiny applied. The following month your teen should do the other parent, and the third month themselves. The reason for teens to start with your and your spouse, rather than with themselves, is it’s simply more fun. Good luck!

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My favorite thing (and I know this makes me just about the dullest person around): A money lesson with double bang for the buck.

So I was sitting here trying to explain to three teenagers why it’s important to reinvest money in your future — my newest euphemism for “Don’t spend your entire allowance and babysitting money. Put some in savings.”

Not happening. I got trumped by Jonas Brothers tickets. I never stood a chance.

And then one of the teens’ mothers came by. She works for an environmental non-profit. This woman does so many deeds that benefit society, just standing near her makes me want to run out and build affordable housing–or at least get my husband off the sofa to go rake the elderly neighbor’s yard.

The point is she was telling me the challenges of getting her grant money actually paid; they’re always late. But she still needs to pay her team on time. But they recognize the value of what she does, and the way she is growing the programs. Every year she grows the program, these grantors give her more money.

Bingo, the allowance saving lesson was born.

The great thing about a non-profit is it’s all about reinvesting money in the future of the organization. It’s about making the organization function well and grow, because additional money is usually infused only if the organization proves its merit. And the real differentiator between a non-profit and profit-based company: The money earned by the organization goes to pay salaries, fund programs, and pay all other overhead. There is no profit taken.

What exactly is profit? It’s the money left over after the overhead is paid. What is overhead? Every cost the company is liable for; all the expenses. Profit goes to the owners in a privately owned company, either as their only income, or as extra money, if they take a salary as well. In a public company, it goes to the owners in a manner of speaking as well. It goes to major shareholders, and Board of Directors members.

Profit can be a good thing, but it also causes problems. Sometimes corporations focus only on profit–which makes the maximum money for the executives, who are the major shareholders and Board members. Sometimes they want profit above all else, and the quality of what the company produces suffers as a result. Sometimes they produce a cheaper product, or decide to fire some employees so the profit is bigger. Companies can end up failing because they focus so much on profit at the outset that they don’t invest in creating a quality company.

(Disclaimer here: That’s of course not always the case, or even mostly the case. But it’s a danger, especially for newer companies.)

Tell your teen that they are like a brand new company just starting out. Bear with me here. If a brand new company is all about profit and doesn’t reinvest in the company, then it won’t have the means to produce quality goods and services and grow. A company that doesn’t grow folds.

A teen should be like a non-profit. Their financial lives are just starting out. If they take everything as profit–spending money– then they’re not investing in themselves for their growth. Growth goals for a teen: They need a car and insurance ones of these days, right? College money? Rent money for a cool apartment? Or bring it down a notch: Money for that ski trip that will enhance their spirit. These are things that help the teen grow.

Give it a try. I’m curious how your teens react. They tend to be socially conscientious, so the idea of functioning for quality rather than greed should appeal to them.

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I’m starting to sound like my father, even when I talk to myself. I find that scarier than sounding like my mother. Well, in some ways.

Here is what I literally caught myself muttering this morning as I prepared to teach my class: “Kids today, they can’t calculate anything. They have gadgets to do all their thinking so they don’t understand anything.”

If this were a movie, that’s where they’d do a freeze-frame closeup on my horrified face. Kids today? Did I really just say that?

The lesson I was planning was about understanding interest rates, what affects them, and how the media handles coverage of them. I began the grouchy muttering as I packed my laptop and looked for my keys. I knew it would take the entire class period just to give them a primer on what an interest rate is, and we’d never get to the political and economic influences, or media focus.

Teens should not reach college without knowing how to calculate interest, both simple interest and compounded interest.

My father wouldn’t let me out of 8th grade without knowing how to calculate interest. And he did not mean knowing how to push buttons on my Texas Instruments calculator. He’d be doubly appalled that kids could bypass comprehension entirely now by Googling “interest rate calculators.” At least I had to know what to multiply by on my calculator.

I am now a believer, a disciple of my father’s dogma, that two things should be outlawed at any educational institution: chewing gum and calculators.

“The privilege to use a calculator should be granted only when the person has demonstrated mastery of what he or she is calculating. A calculator is a gift of speed for those masters. It is not a portable appendage to your brain.”

“But Dad, they let us use a calculator in school.” That’s me, age 14.

“Well then, we’ll change their mind or we’ll change schools.”

Enough of me reliving my very quotable childhood with my father.

How To Calculate Simple Interest

First, a definition of simple interest: The amount paid for the use of someone else’s money. So, if you borrow money, it’s the amount you pay on the loan. If you invest money, it’s the amount you earn for investing the money. It is expressed as a percentage. Example: A 5% interest rate means that you will earn $5 for keeping $100 in a savings account for a year.

Here is the formula for simple interest:
M = P + (P x i)

M is the final amount including the principal.
P is the principal amount.
i is the rate of interest per year

How To Calculate Compounded Interest

First, the definition: Compound interest is the amount you earn not only on the original principal, but also on the interest earned earlier and left in the account. So, in the above example, after year one, there is $105 in the account, and so future interest will be calculated with P = $105 instead of $100.

Interest can be compound daily, monthly, or yearly. Daily is complex because sometimes you’re talking about including a fraction of earned interest into the principal and then calculating for the next day.

Here is the formula for calculating all compound interest.

M = P( 1 + i )n
M is the final amount including the principal.
P is the principal amount.
i is the rate of interest per year, or per day, or per month, depending what compound interest rate answer you want.
n is the number of years, or days, or months invested, depending on what compounded interest rate you’re applying.

Here’s the above example with compounded yearly interest for 3 years. Same 5% interest rate.
M = 100 (1 + 0.05)3 = $115.76.

Once your teens memorize and understand these formulas, and how to calculate interest, play a game. Show them these calculators. Let them look at each one that’s pertinent to interest (all are except the allowance calculators). There’s a savings calculator, mortgage calculator. Once they can demonstrate an understanding of how each calculator works, by writing down what the equation is that the calculator uses (and use the variables above), then let them play out savings and mortgage scenarios.

And if your teen is up for it: The Calculator Challenge

When they’re finished, see if your teens can think of a new calculator to invent. If they do, and you send it in to me, with the explanation of how it was derived and the formula or it, I’ll have the calculator made and put it up on the blog. Your teen can name it–e.g. Maria’s Can You Afford This Item Calculator–and will get full credit on the blog.

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The first thing I always want to say at Halloween time is for kids to make their own costumes instead of buying or renting them. Costumes and accessories are so expensive.

Yes, then teens look at me like I’m a peasant with three heads. What could be more embarrassing than a hokey homemade costume?

“But ahh, there’s the catch. I’m not going to make  it. You are.”

That didn’t quite work. It needed some serious spin. So then I tried this approach and finally got somewhere:

If you have any aspiring fashion designers at home, let them really have at it. Give them old clothes to really alter, rent them a sewing machine. Try to get a few friends involved for a group costume.

If teens aren’t inherently interested in putting together costumes, tell them that if they make their own, they can use the money they save to go out with, or throw a party with. If they get a group of friends, and their parents agree, they can save a lot and really throw a party.

Now, it’s arguable that if you allow them to spend the money they saved not buying a costume, what’s the point? Well, if you can afford it, you teach them the lesson that using available materials and doing things yourself can save a fortune. That fortune can add to your quality of life, such as a party. It is also conservationist. We have many materials around us all the time that can be transformed into new things.

This can apply to taking old clothes, like a skirt or shirt that your teen fashionista is tired of, and adding buttons, or accents of different cloth to make it a new style. It can apply to painting a room instead of hiring a painter, landscaping, repairing bathroom tile, building a shelf out of spare wood, a tire swing out of an old tire. Or even using worn out bicycle parts to make a garden sculpture if you have a budding artist.

This is the era of green, and they are the green generation. To be able to see materials for their value as raw ingredients in something new is such a valuable resourcefulness. It also enhances creativity, problem solving skills, and boosts confidence.

In fact, you can use this Halloween to start a monthly do-it-yourself project for your teen, and pay them for it. Have them choose a project needed to be done in the house and let them try to do it themselves. It’s best if they think of the project, but that may take a while. Jumpstart them with the first few ideas. Once they start repairing or improving something on their own, they’ll think of other things.

Cleaning out and organizing places, like garages or attics, can work as a do-it-yourself project. You can also allow them to keep raw materials, if you have the space, that they think would be good for other projects. Maybe get them a toolset for Christmas.

In the meantime, for the Halloween project: Gather old clothes from closets and attics, for costume materials, to cut and adorn. Any old clothes you have left over they can either stockpile for future costumes, or donate to Goodwill.

Price what their costume would have cost in a costume shop. Give them the difference.

I’m very interested in do-it-yourself projects that teens accomplish. And if they build something interesting, send a photo too!

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I must say I’m liking these carbon footprint money lessons. You can jump right in without any preamble because teen awareness about the effects of consumption and wastefulness is already being raised at school, and among their peers. Because teens are so aware, monetizing conservation has a better chance of sticking with them than many other money lessons.

So let’s keep these ideas rolling like a trash can on wheels. If you have carbon footprint money lessons, games, or policies at your house, share them!

Trash and recycling. These are now your teen’s domain. Taking out the trash is a time honored job for teens, so it’s about time it had an upgrade. When I say teens can “take out” the trash, I mean get rid of as much trash production as possible.

The number one point of this trash challenge is for your household to stop producing so much trash per week. My husband is shrinking over there on the sofa as I write this. I honestly have no idea how one man can produce so much waste. When we started this challenge at my house, we had the carbon footprint of King Kong.

Explain to your teen–and it won’t be the first time they’ve heard it–that it’s not enough to put a plastic water bottle into the recycle bin. You have to stop buying and using so many plastic bottles. Go ahead and Google photos of landfills and recycling plants if you need the point to hit home.

What I love most about this conservation concept is what a perfect analogy it is for saving money. Spend less, have more. Simple. Learn to live within your means from day one, you’ll always have money. As my father used to say: If you don’t live within your means when you make $30,000, you won’t live within your means when you make $100,000.

So here’s the teen trash and recycle challenge:

1. Have them count how many trash bags are taken out of the house and into the outside trash bin for weekly collection. They need a beginning one-week measure of trash. Have them start a graph chart. Week 1, Week 2, Week 3, etc. across the top, and then # of trash bags running in a vertical column. Each week they find a point on their graph: How many bags of trash. This beginning measure is Week 1.

The graph chart is important here because they need to see progress, which direction they’e moving.

2. Week 2: At the beginning of Week 2, when they have that beginning measure in mind–say 4 bags of trash per week–have them write down three trash saving ideas for the family to do for Week 2.

(Do start the Week on the day of trash pickup so you’ve got an empty trash bin outside your house. Once you start reducing trash, it will be gratifying to see that bin less full.

Some examples of trash saving ideas: Don’t use sandwich bags in lunch boxes, use reusable containers. (Have you teens save their lunch trash, by the way, and bring it home, to show how much they’re really wasting. They’ll hate this idea at first, but just tell them to shove the trash in their backpacks. It’s part of the challenge, and there will be a monetary reward at the end of the challenge.) Instead of buying canned dog food, you can buy some meat and a big bag of the dry dog kibble and cook for the dog. Buying low grade ground beef in bulk amounts is cheaper anyway. Dog food costs add up and often the cans aren’t recyclable.

The great thing about trash conservation ideas is that they’re often money saving ideas. If you use tupperware for school lunches instead of going through hundreds of plastic baggies, you’ll spend less. It’s a also return on investment lesson. You buy the tupperware once at a certain price; say $4 for a container that holds a sandwich. Check the price of a box of sandwich baggies. By the time you have saved X number of sandwich baggies that equals $4, you’ve made the return on your investment. After that moment–if they haven’t lost the tupperware top at school or melted it in the dishwasher–the use of that tupperware is all profit.

3. For recycling, tell them to make another chart. Call it Trash 2, because they should still think of something they throw out, even if it’s reused in some way, as producing waste. This has the same Week 1, Week 2, etc. across the top of the chart, and # of recycled items running vertically. Of course they’ll need room on this chart for those numbers to go much higher. With trash bags, you probably won’t run more than 10 in your vertical column, but with the # of recycled items, who knows how high you’ll go.

Have them count the # of recycled items thrown out in Week 1, use that number as a baseline again. The challenge in Week 2 is to reduce the # of recycled items in the bin.

4. At the beginning of Week 2, have your teen think of two recycling reduction ideas for the family to follow. One easy example is plastic water bottles or soda cans. Get a reusable water bottle and fill it up. Buy large soda jugs instead of cans. Buy big tubs of yogurt instead of the individual serving size. In fact, if your teens aren’t aware of the bulk section at your grocery store, show it to them. Definitely bring your teen grocery shopping with the idea of researching trash reduction. Or if your grocery store doesn’t have a bulk section, go to one that does. You can buy so many things in bulk, and keep everything fresh–food items like nuts, cereal, rice, pasta–in airtight containers.

5. For every bag of trash they save per week, give teens a dollar amount to put into savings. Do the same for the # of recycled items they reduce per week (smaller amount of course, to make it relative).

I say savings here instead of spending money because it’s such a great metaphor for conservation, who can resist? Besides, let them see how savings add up when you save. It’s the corollary to witnessing how much less waste your family will produce. You could even start a carbon footprint savings account for your teen, and in a year, see how much money they’ve saved from this trash challenge, or the gas and electric challenge.

Keep up this challenge for as long as you can. After a certain point, there may be weeks, or months, that go by without much reduction. But to maintain focus on conservation, and always hold out the possibility for reward, will eventually inspire new ideas. And it’s so great for them to keep a long-term chart. It will only take them a minute each week.

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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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On some days, when patience is thin—okay, yesterday—one of my pet peeves starts bothering me more than ever. It’s the pop-up discount offers that take over your screen when you go to a newspaper site, or try to open web mail. They’re no longer little boxes. They cover everything else. So aggressive. And if these discounts are so pervasive, why do teens and college students seem to have relatively small gains when it comes to understanding the value of money, the recession, and why a $500 purse is ludicrous.

Okay, so you see what a bad mood I was in. Today I’m trying to recuperate by turning this advertising madness into something constructive. And so the coupon challenge game was born. If I had to choose three recurring life expenses, budget items, that I want teens to appreciate, understand, and learn to manage it would be: groceries, home repair/improvement/maintenance, and car maintenance.

If they can get their minds around those things, and learn to try and conserve in those areas, my guess is that the awareness and knowledge would expand to other areas, and translate into something more core: a disposition about expenses that is money saving.

Here is the teen coupon challenge game:

You put your teen in charge of finding the best coupons for groceries, home repair, improvement and maintenance, and car maintenance and repair. They do it for two months. For each month they create a chart for the coupons they found in each category, and what the total savings was. If they find more the second month than the first, they get a prize. But, here’s the catch: You don’t tell them all that up front, or they’ll do a lousy job the first month to make sure they’re a shoe in for the prize the second month. You start by telling them there’s a prize for the first month if they save 10% of costs in those three categories across the board. Then you tell them that there’s only a prize for the second month if they beat that percentage. If it’s 10% or less, no prize.

Make the prize something really good, that they really want.

Sounds simple? Well, it is and it isn’t. The concept is simple and it should be: First you take a look at something and make changes. Then, when you take a deeper look, trying to achieve more, usually in life there will be room to do so. That’s a very valuable lesson because it breeds a sense of take action when things are tough, instead of the very common sense of victimization and futility. There is always room for change and improvement if need be.

So, to get them started:
1. Have them make a chart with the 3 category heads.

2. Sit down with them and make a list of all home repair, maintenance, and improvement things your home needs. Making this list in particular is helpful in so many ways. They’ll see how overwhelming the details of home ownership are, and how much there is to do. They’ll also be creating a list they can work on later, perhaps for hire! They can do odd jobs for you in order to earn allowance or extra money. They’ll have a stake in these projects once they do the research to get materials at the best price possible.

3. Send them on their way by telling them to start Googling coupon discounts in the 3 categories. They’ll find so many so fast they’ll feel immediately successful and get motivated. Honestly, if they can’t save 10% and much more on all expenses coupon hunting, they’re not trying. The goal is specifically set so they can accomplish it easily.

4. Tell them to use the real world as well. They should go to grocery stores, drug stores, hardware stores, Lowes and Home Depot, tire and muffler and car wash places. They should look for the coupons that are offered in the store and ask customer service about special deals. In the same vein, the local newspapers are very important, especially Sunday papers with whole coupon sections.

5. Have them record, on their chart, each coupon they use, and then total them at the end of each month.

One thing to advise your teen, particularly in the second month when they’re trying to beat their high score, is to tell them not to worry if they can’t tell if they got the very best deal available out there. Just saving money is a job well done. The problem is that there are so many offers out there, and they all claim to be different, and most are the same really. The second month is about finding more offers on more products, not necessarily a better offer on the same product.

Enjoy having your kids save you money, and time, if you are the household coupon clipper.

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It’s not too soon to teach your kid to plan financially, and invest in the world. In fact, if you wait until they learn it in school, or from some cold-calling financial planner, it will too late for them to have a confident relationship with making money from money.

I bought my first share of stock at age 13, compliments of my father. I tracked it for years. Never mind the economics classes I took. I learned how the stock market works because of my shares in Kaiser Cement. And I’ll get to the teen lesson about buying equities (individual stocks). But not first.

I’m going to start with how to buy Certificates of Deposit (CDs), or, as credit unions call them, Shared Certificates, for a couple of reasons. One, explaining what CDs are and how to buy them gives a primer on how financial institutions think and operate. Two, despite popular opinion, I do not believe everyone is cut out for buying stocks. I will address that in the Buying Stocks post. CDs, on the other hand, are a great starter investment for anyone.

And there’s never been a better time, because in this economy, they’re safe and sound. And now you can buy in for as little as $5. Check out this credit union offering a $5 Shared Certificate, designed especially for students. Financial institutions want Generation Y investors.

How to teach your teen to buy a CD:
1. First, give them a definition. A CD, or Shared Certificate, is a fixed-income investment issued by banks and credit unions, and is insured up to $100,000 ($250,000 on retirement accounts). Here’s what fixed income means and how it works: You give the financial institution a fixed amount of money for a set period of time—6 months, 1 year, 2 years etc. You may not use the money during this time.

In return, when that time is up, the financial institution gives you back the principal (your initial investment), plus a fixed amount of interest that is set at the time you buy in. That interest rate is going to be higher than a checking, savings, or money market account, which is why people like CDs. You make money on your money by tying it up. And that’s the key concept: If you withdraw your money before the set time is up, you get penalized by losing interest and in some cases, some of your original investment.

2. How to buy one: The simplest way is to go into the financial institution where you do your banking and ask them to sell you one. But, teach your teen to comparison shop. They can go online and Google CD rates, and see who has the best offer. Also, because their initial investment may be seriously limited, so may the offers.

Also have them look at potential types of CD—some have flexible withdrawal periods, some allow you to get the benefit of a better interest rate even if you’re in the middle of your locked in time period. But there aren’t a lot of options at low buy in rates. Still, no harm in asking. Have your kids write down questions to ask the financial institution once they find a good rate.

Comparison shopping is a key lesson here because they’ll learn an overarching investment principle: The more money you invest, the better deal you get. Period. People who dump $5,000 into a CD will get a better interest rate than someone investing $50.

3. Call the financial institution. Once they’ve chosen the deal that suits their needs, they simply call the financial institution, fill out the paperwork, and pay for it. (They may be bummed that they don’t receive an actual certificate in the mail, only a bank statement. I know I still am.)

4. Make sure to be clear about what happens for early withdrawal: Each financial institution is different. Some levy interest penalties, but some cut into your principal as well. Tell your kid to get the facts before they sign anything. For instance, don’t let them tie up money for 2 years instead of 1 because they didn’t realize if they changed their mind they’d have to pay for it.

5. Make sure they write down the CD maturity date and then call the financial institution to cash out before that date. Most CDs roll over (are reinvested) automatically if you don’t actively cash out. Legally, the financial institution has to notify you 30 days prior to a CD maturing, but don’t let them rely on that. Who wants to get embroiled in the paperwork of arguing who was right. You’ll win if they forget to notify you, but no one needs that headache. And they’re only required to send something out in regular mail, so all they have to do is prove they mailed it, not prove you got it.

This is a great lesson for kids in personal responsibility. Don’t stand on ceremony and blame others if things go wrong. Take the reins and make sure nothing goes wrong.

It’s like that old driver’s ed saying: Most accidents can be avoided with alert, defensive driving. Same is true for money.

What age do you think is appropriate to buy CDs? Please share your thoughts.

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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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