Give the children a piece of graph paper with three to five subtraction problems written on it in order of progressing difficulty. All but the first should require regrouping, and the last should require that they try to regroup a zero. There should be one digit per square, and the numbers should be written one above the other, with their place values lined up. For example, the problem 345 - 278 should be written as follows:
345
-278
Do the first problem together, you on the board and the children on their paper. Elicit answers from them about the process. Because this problem does not entail regrouping, it functions as a review of what they have learned of subtraction to date. Ask questions such as, "What do I do first?" "And now?" Allow them to make mistakes, but guide them towards the correct answer. Remember to work from right to left, top to bottom.
Write the second problem on the board, but before beginning, ask the children the following questions while pointing at specific digits: "What place is this digit in?" After they have responded correctly to several place values, such as ones, hundreds and tens for example, ask them questions such as the following: "How many ones are in a ten?" "How many tens in a hundred?" "How many hundreds in a thousand?" Finish with a question similar to, "If I changed one ten to 10 ones, would I have changed the number?" The correct answer is of course, no. If the children are having difficulty grasping this concept, you may find it helpful to use math manipulatives to give them a visual representation. Ask them to count the units in a ten block, then to count out 10 one blocks and line them up beside each the ten block. This should prove to them in a concrete way that the two are the same. You may wish to repeat this process with tens, hundreds, and thousands blocks -- always moving only one unit up or down.
Do the second problem together. When you come to a digit where the top digit is smaller than the digit beneath it, stop. Ask, "What can I do now?" The students will come up with a number of helpful suggestions, which you can attempt with varying degrees of success. Finally, ask them a question like this, which is based on a problem where the digit in the ones place is smaller than the digit being subtracted from it: "What if I took this number, which is in the tens column, took one ten away, changed it into 10 ones, then put them in the ones column?" Because of the earlier class discussion, this should not be too much of a conceptual reach for most children.
Demonstrate taking one ten away and changing it to ones by crossing out the digit in the tens, and writing a digit one less above it. For example, if 5 is in the tens column, cross it out, and write 4.
Demonstrate adding 10 ones to the ones column by placing a 1 to the left of whatever digit is in the ones column, making it a double-digit number. For example, if the digit in the ones column is 2, it will become 12. Subtract as usual.
Continue to subtract as a class, repeating steps 4, 5, and 6 as often as necessary. When you come to the fifth problem, stop when you need to "borrow" from the zero. Ask the children, "What does zero mean?" When they reply, "Nothing," ask if you can take something away from nothing. Of course, the answer is no. Solicit ideas from the class about what to do next. Lead them to understand that they can regroup the number to the left of the zero. Say the zero is in the tens column, and the number to the left in the hundreds column is 3. They can regroup 3 hundreds to become 2 hundreds, and write 1 to the left of the zero to make it 10 tens. Ten tens can then be regrouped as 9 tens and 10 ones. The problem then can proceed as usual.
Hand out practice sheets and assist with individual students as necessary. At this time, you may also choose to lead the children to understand that when they "carry" in addition, they are also regrouping by taking 10 ones and moving them to the tens column as 1 ten, etc. Most children, unless they are very young, will have been doing this for some time without understanding why, and some will find it helpful to see it in a new light.
Evaluate the children's understanding of regrouping with a quiz. This should be administered sooner, rather than later, and need not consist of more than five questions. Review the concept on a frequent basis.