To set up squid to allow password authenticated access add the following to your squid.conf file.
auth_param basic program /usr/lib/squid3/ncsa_auth /etc/squid3/squid_passwords.txt
auth_param basic children 5
auth_param basic realm Squid proxy-caching web server
auth_param basic credentialsttl 2 hours
acl my_passwords proxy_auth REQUIRED
http_access allow my_password
Then create passwords with the htpasswd program.
htpasswd -c /etc/squid3/squid_passwords.txt my_username
Health Warning These instructions are for squid3 and provide for Basic authentication which is not encrypted. It will get you up and running but should not be your only security or you may end up running an open proxy.