Magnetic toys are great for kids because they can capitalize on magnets' key properties -- the fact that they attract and repel one another. One basic magnetic toy is a set of colorful plastic shapes mounted on magnets, which can then be used on a refrigerator or other piece of metal to stretch kids' creativity and motor skills. Older kids (5+) can benefit from magnetic construction toys, which are similar to Lego but use magnets to stick together.
Magnets can also be used to help kids learn how to read. If you have a child who is learning how to read, you can buy some magnetic letters. Once a day, put a word on the refrigerator for him to try to read; as he gets better and better at reading, you can move into larger words and then into sentences.
Magnets attract and repel regardless of what is between them and the metal they are attracting or repelling. You can use this to your advantage by having magnet races. Give your children each a magnet (or take one yourself), and put a steel marble or other piece of metal on top of the table. Have them race across the table by putting the magnet underneath and moving it as fast as they can. The marbles will move as if by magic, and your kids will enjoy competing against one another with magnets.
You should make sure the magnets are strong enough for this activity. A refrigerator magnet probably won't work, but a lot of hobby magnets will. Test your magnets out before you buy them by running them across a table or counter at the store, just to make sure.
Older kids can conduct experiments with magnets. This activity feels more "serious" which can appeal to adolescents. It also helps them build a foundation for scientific inquiry.
Have your kids measure a few different magnets' strength, taking care to quantify all of their data. They should write down the size and shape of a magnet, then test how well it attracts different metals at specific distances.
Once they do this, they can move into graphing or otherwise displaying their data, which makes them feel like scientists while giving them a background in the scientific method.