FROM PIGGY BANKS TO DOW JONES : PARENTS LEARN IT PAYS TO TEACH CHILDREN TO SAVE.

Byline: Deborah Adamson Daily News Staff Writer

Every penny that 16-year-old Aubreanne Spear socks away into her savings account gets her a step closer toward a college nest egg.

This summer, the Winnetka teen is baby-sitting and helping out at her parents' home-based business - packing, typing, doing computer work and answering phones. During the school year, she tutors other kids for $6.50 an hour.

Spear makes between $1,500 to $2,000 a year, of which she saves between 30 to 40 percent. So far, her savings account has about $1,500 - which includes cash gifts. She also withdraws regularly to help her parents pay for her car.

Saving isn't easy, Spear acknowledges, especially when her peers want to hit the malls. But it's a hard choice that the teen has decided to make.

``I'm looking to the future and making sure that I have money to spend to be able to do certain things I want,'' she said.

It may be a simple goal, but it's not always easy for teens to achieve it.

Every summer, millions of teens flip burgers, mow yards, wash cars and do other work to make a buck.

A veritable fortune goes through youngsters' fingers every year - $100 billion a year for the 12 to 19 age group, according to Teenage Research Unlimited in Northbrook, Ill.

So how does a person get a teen-ager to save some money instead of spending it all?

The best way to approach the issue of saving and investing isn't by scaring your kids about the realities of life, but to present it in a positive light, said Steve Sanders, a financial consultant for Citibank who teaches money management at high schools nationwide.

``Young people aren't moved much by fear because they think they've got the rest of their lives anyway,'' Sanders said. ``If you present it in a positive light - you're excited about it and this is part of their maturation process - they will receive it as such.''

``Treat them like they're adults, that they are responsible enough to handle this situation, that `mom and dad trust you enough,' '' he added.

An early lesson is avoiding ``spenders' disease - where the money burns a hole in their pockets,'' Sanders said. ``If they can learn that at an early age, it can be beneficial to them moving forward.''

Develop a ``spending plan of action'' - essentially, budgeting.

``Budgeting money doesn't sound fun, and it's really boring for young people,'' Sanders said. ``Make a plan on how to spend 90 percent of what they earn. That means they are going to save 10 percent.''

Let your child make a list of what they want to buy, and price them.

But make sure they learn how to find the best deals, Sanders said.

``They should comparison shop,'' he said. ``Have them write down differences in price to teach them to be wise consumers, not impulse buyers.''

Next, prioritize the list. Most likely, your child will want to buy more than he or she can afford. By ranking items on the list, they'll realize that they can't buy everything they want, but they probably can get their top picks.

Differentiate between your child's ``needs'' and ``wants.''

``Does he need the $150 pair of tennis shoes or does he really just need a $30 pair?'' Sanders said. ``If he wants that pair of $150 shoes, there's something else on the list they have to sacrifice, like maybe another CD.''

Take your child to the bank and open a savings account for him or her - it brings home the point that this is their money and they are responsible for it.

But don't be too strict - let your child spend some of his or her savings, said Paul Richard, director of education at the National Center for Financial Education in San Diego. Otherwise, there's little incentive for them to save.

Most of all, parents need to set a good example for their children.

``Parents are the prime role models,'' Richard said. ``Kids watch their parents.''

Spear's father, John, has always taught his kids the value of saving.

One of his lessons: ``You can't live for today, because if your parents can't help you, you're on your own.''

John Spear credits his parents' frugality for his own money management habits.

His 77-year-old mother, Elaine, used to save every penny she could to buy savings bonds. She used coupons and looked for bargains. She also encouraged her three children to work and learn the value of a dollar.

``We've always been a saving family,'' the Tarzana resident said.

So take an active role in teaching your kids about money, Richard said.

One way is by introducing them to the financial pages, Sanders said.

They'll see that there are different interest rates and rates of return, and will be encouraged to learn how to make their money grow faster.

``Tell them there's another type of CD, not a compact disc but a certificate of deposit,'' Sanders said. Money market accounts also are an option.

Some business articles they read will feature companies that make toys or clothes they like. That could lead to stock investments. You could encourage investing by matching the money your kids spend to buy stock, he said.

By setting up a Uniform Transfers to Minors Act account - it's Uniform Gifts to Minors Act for certain states - parents or other benefactors can invest for minors. The beneficiary receives the assets at age 18.

If the child doesn't need the money for at least five years, one stock mutual fund you might want to consider is Stein Roe Young Investor.

The $115 million fund mainly invests in companies that are known to and serve youths - such as Nike, McDonald's and Toys `R' Us. Other investments are in smaller, potentially faster-growing industries such as educational software.

You can open an account with a $100 minimum investment, if an automatic deposit of $50 monthly is set up as well. Otherwise, the minimum is $2,500.

The fund is no-load. Annual expense is 1.25 percent of assets.

Investors not only get the fund's financial reports but a fun quarterly newsletter called ``Dollar Digest'' for elementary to junior high kids.

You also get an activity guide of money-oriented games, a parents' guide to talking to kids about money and a chart to track investments.

Best of all, the fund's one-year return ended June 30 was 47.6 percent compared with 23.38 percent for the Standard & Poor's 500 Index.

Since inception, the fund has averaged 33.76 percent a year.

But there's not much of a track record. The fund was created in April 1994.

For more information, call (800) 403-KIDS.

Another fund to consider is Twentieth Century Giftrust - administered by Twentieth Century Investors Inc. of Kansas City, Mo. It has no connection with 20th Century Industries Inc., an insurance company in Woodland Hills.

The $800 million fund had a 23.13 percent return for the 12 months ended June 30. Its five-year average is 32 percent and 10 years is 21 percent.

The fund invests in growth stocks of small- to mid-cap companies.

A $500 minimum is needed to open the account. The fund is no-load, with a 1 percent annual expense.

It's an irrevocable trust. Opening UTMA or UGMA accounts aren't necessary for the Giftrust, since investments in the fund aren't considered gifts.

Money can't be withdrawn for at least 10 years, but deposits are allowed.

The account is taxable, and benefactors can't count their investments to the fund against the annual $10,000 gift tax exemption. The fund pays income taxes by taking it directly from the account.

For more information, call [phone].

Finally, investing for those 13 and under has this benefit: Lower taxes.

The first $650 of unearned income is tax-free, Catherine Griffith, tax manager at American Express Tax and Business Services in Westlake Village.

Unearned income is defined as gains from investments that include interest, dividends and capital gains, according to the Internal Revenue Service.

For the second $650 of unearned income, the tax rate is 15 percent. Beyond that, the income is taxed at the parent's rate.

If your child only has earned income - salaries, tips and professional fees for instance - any earnings of $3,900 and below are free from income taxes.

If earnings are a combination of earned and unearned income, take the greater exemption. For instance, if your child makes $2,000 in unearned income and $3,000 of earned income, take the $3,000 tax exemption. The remaining $2,000 in unearned income will be taxed.

CAPTION(S):

2 Photos

Photo: (1--color) Aubreanne Spear, 16, learned her money -savvy ways from her father, John, who was taught by his mother, Elaine.

(2) Aubreanne Spear helps fill orders with her father, John, in the family's home business in Tarzana.

Phil McCarten/Daily News