I came across this post yesterday by an artist who shared ways to recycle art supplies:

http://aleasemichelle.typepad.com/my_weblog/2009/01/6-steps-to-recy.html

I think a lot of these tips are great, and even though they are written from the perspective of an adult artist, they are quite applicable to anyone who has a lot of art and craft stuff laying around their home (ie parents with young kids.) I especially love the idea about putting together collage kits from all of the scraps of paper laying around the house.  Although I probably won't sell my "collage" kits on ebay or etsy as the author suggests, I think a collage kit would make a great gift for a birthday, holiday, or other special occassions.  In fact, I think I might put a few collage kits together and stash them away in the closet for days when my girls need a ready-made craft project idea.