I think it's more important to address the context behind the use of a word. There's another important thing people are no longer teaching their kids any more that I was taught: "sticks and stones may break your bones but words will never hurt you". Teaching resilience to words is just as important as teaching kids the better use of them.
As a kid my friends used the word gay to refer to both actual homosexual things, and also things that were "crap". Being a kid myself I used the word as well in the same way. There wasn't any malice behind it on my part. I didn't know any gay people and I didn't dislike them. The word gay was slang I picked up like a sponge like all kids do.
Most of the time kids are just aping what they hear from others. Rather than tell them "it's wrong" to think or say something, tell them why it's not necessarily accurate to think or say something, explain why, and ask them if they agree... but not in a"do as I say" way. My parents almost never told me something was outright "wrong" because that tended to have the effect of making whatever that was more "fun" to do. Instead they would explain why it wasn't accurate and asked me what I thought, like an equal. (They also put emphasis on respecting thought and intelligence, meaning to impress them I wanted to avoid looking stupid, and so I would gravitate toward trying to be smart). If I did something bad they would ask me quietly but firmly why exactly I had chosen to do it, and in that sense there was no escape from thinking about the consequences of my actions. The result was I grew up a thinker, they never had to raise a hand against me, and I don't tend to throw words like gay around without a reason.
