Q&A: Children and Their Possessions

Recently I received an email from a friend:

I am struggling with my children on several issues related to possessions.  Because my kids are so blessed with all sorts of toys, stuffed animals games... our house is constantly a mess.  The kids lose interest in a toy and leave it right where they were playing with it.  They often lose a piece of a puzzle or the spinner to a game without really noticing.  I feel like I am constantly nagging about taking care of what God has blessed us with.

The other side of this issue is that they cling with all their might to stuff.  Cleaning up rooms often results in tears and pleading with me to not throw away old scraps of paper, half finished craft projects and HappyMeal Toys which have not been played with for years.  The mention of donating items that we no longer play is not well received either.

I feel like I am failing my kids on both fronts- they are not appreciative of what they have been given and yet they cling to stuff in an unhealthy manner.  Do you have any wisdom on this issue?

So, the issue is that her kids (like my own kiddos) are both unappreciative and selfish. How can we lead our children towards responsibility and generosity? I'll attempt to answer that by giving some principles and some application.