For books, we've used a basket to hold about 20 books downstairs, then a small bookshelf in my daughter's room. I rotate books every month or so, so there's something fresh downstairs.
For the kids arts & crafts, we use the small, clear, rectangular, plastic boxes with lids (the kind you can get at a dollar store). We sort crafty items by box (markers, playdoh, playdoh tools, crayons, stickers & stamps, bead packages & string, etc). We also use old shoe boxes (I cover them in contact paper, and put a label on them so we know what's inside, and they look nicer than plain shoe boxes). We also use other small containers for various supplies - like old baby-wipe containers for all of the glue bottles and sticks. Use what you have... the kids don't care, and it teaches them to reuse and recycle. All of these containers are kept on shelves in a cabinet, so they're not cluttering up visual space. This also limits their random use (we don't care for ALL the crafts coming out at the same time. Our rule is, if you want to play with one thing, you put the last thing away. In other words, if the girls want to bead, they have to put the playdoh away first). Obviously, this rule doesn't always work, but it helps.
As for toys, we've had different systems over the years (my kids are now 8 & 10). Their bedrooms are upstairs, so we used to keep a lot more toys downstairs for them to play with, so they wouldn't have to go up and down the stairs all the time. Now that they're older, they keep most of their indoor toys in their bedrooms. That being said, we try to give them plenty of storage (shelves, bookcases, cabinets, etc), along with plastic containers that range from the small $1 kind, to the larger $6-8 kind (for stuffed animals, dolls, horses, etc).
Finally, the real trick it to purge. Some parents do that with their kids. I personally prefer to do it when they're not around (what they don't know won't hurt them, right !?!). Anyway, I try to go through their stuff twice a year and get rid of anything that's broken, missing parts, or they simply don't play with anymore. On the occasions when I've done it with them, I've explained that we need to make room for their new bday or xmas gifts.
Good luck!
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