Combine all ingredients (except food coloring) in a medium-sized saucepan.

Stir over medium heat until smooth.

Stir continuously until the dough balls (about 1-2 minutes).  Remove from heat.

When dough is cool enough to handle, knead until smooth.

Form into a ball.

Divide into as many colors as you'd like to make.  A single batch makes a good amount for four colors.

Add food coloring to the divided dough.  Gel food coloring works quite well.  I have not tried liquid food coloring.

Knead the food coloring into the dough. To protect your counter top, knead over wax paper.  To protect your hands, wear plastic or rubber gloves, if you have them (you could also put the dough and food coloring inside a ziplock bag and have the kids squish it around inside).

When the dough is a consistent color, ball and set aside.

Repeat with the rest of your colors.