NEW YORK - For Lori Mackey, the back-to-school shopping season is a time for teaching. While her children are busy selecting notebooks and new outfits for the first day of class, she's busy explaining to them the importance of comparison pricing and staying within a budget.

"You have families that can spend $1,000, and you have families that can spend $200," said Mackey, the founder of Prosperity4Kids Inc. in Agoura Hills, Calif., which specializes in financial education for children. "It really doesn't matter how much you've got -- it's an ideal opportunity to teach kids the value of money."

It's an important lesson as families grapple with tighter budgets because of higher gasoline prices, the deteriorating housing market and credit problems that have raised the cost of borrowing.

At the same time, back-to-school costs continue to rise, according to surveys by the National Retail Federation. The trade group, which is based in Washington, D.C., said families with children in elementary, middle and high school expect to spend an average of $563 on back-to-school merchandise this year, up nearly 7 percent from 2006. Families with college students face bills of $957, up nearly 9 percent from last year.

Mackey said that before she heads out for school shopping, she and daughter Briana, 14, and son Devin, 11, do an inventory of what clothing the children already have.

"We go through clothes and decide what still fits, what's still in good condition," she said.

Each child gets a new outfit for the first day of school, and this year both need shoes and a couple of shirts, Mackey said.

"But we certainly don't have to buy an entire new wardrobe," she said. Mackey also recommends delaying some clothing purchases until after the school year has started "so the kids get a feel for what's going to be 'in' and what's not."

Checking on what paper supplies the kids already have also can cut down on back-to-school bills, she said. One way to cut costs is to get together with other families and make bulk purchases of paper, pens and other supplies at discounters like Costco, BJ's Wholesale Club and Sam's Club, or at office supply stores, she said.

Mackey is a big advocate of paying kids allowances in exchange for chores, and suggests children allowed to tap their savings if they want something for school that's outside the family's spending plan.

Todd Mark, director of consumer relations for the Consumer Credit Counseling Service of Greater Atlanta, also takes his children shopping for school clothes and supplies.

"There's no age too early to start teaching them about money," he said.

His daughter, Katie, 7, and preschooler Joshua, 3, get spending limits and have to make choices to stay within them.

"If they want to spend $1 on a Harry Potter folder, then they'll have to make do with one less colored marker," he said. "Or they can get 250 crayons of a generic brand or they can buy a name brand, but get just 64 colors. It's their choice."

Mark also believes it's important to let children select things they like.

His daughter, for example, is a fan of the made-for-television movie "High School Musical," so her book bag, notebooks and pencils are movie-themed.

"She had a definitive idea of what was cool, and that's important," Mark said. "There has to be fun in it, too."

Mark suggests parents use cash rather than credit cards to pay for school items because cash is easier for kids to understand.

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