Introduce the kids to the different tools they'll likely use while they paint. These include the paints themselves, different brushes, blotting tools, such as paper towels or cloth towels, water, and of course, the canvas. Provide the kids with tools of their own, as this will help them develop a sense of pride in their craft and it will prevent them from spoiling your set.
Encourage the kids to simply play with the watercolor tools and the canvas. Sit with them and paint your own picture as they slop around in the water dish and paints. The combination of watching you and making mistakes on their own will teach them invaluable lessons about watercolor, such as how to avoid diluting the paint too much, how to avoid bleeding colors into each other in the set and even how to blot paints to create artistic effects.
Ask the kids what they'd like the paint and direct their playing and experimenting toward the painting of that object. For example, if they'd like to paint an animal, get a large picture of that animal, set it up as the object to-be painted and encourage the kids to paint as you paint along. Again, the purpose of this step is simply experimentation and self-discovery. Most children, if they are truly motivated to paint, will likely become frustrated that they can't successfully use the watercolors and they might ask you questions about technique.
Choose a specific technique relevant to the object you are painting and demonstrate it for the kids. For example, if there are clouds in the background of a painting, you can show them how to use crumpled tissue paper to add texture to a swath of blue paint, creating the appearance of a cloudy sky.
Challenge the kids to deploy the technique you just demonstrated for them. Make it a game. If there are several kids following your instruction, have them compete against each other to produce the best painting using the technique you demonstrated. If you're teaching a single child, have her attempt to replicate your drawing.
Introduce newer and more challenging techniques as they children slowly develop their painting skills. You can continue to challenge them by presenting them with simple objects for painting and encourage them to paint other objects they see at their homes or out in the world around them.
Present your students with a challenging object to paint that will utilize several of the techniques you've introduced to them. For example, you might show them a photograph of an interesting landscape or take them to a picturesque place in your neighborhood.