Good question, which was covered in an Islamic parenting lecture I attended a while back. Insha'Allah my notes from this below will be of some assistance.

The basic principle is that we must never ever forget that the vast majority of the disbelievers have at least been made aware of Islam but have decided for whatever reason to reject it (although there will always be some that have not yet been told about Islam). By rejecting Islam they have chosen a path that, if not rectified, will lead to a very difficult time on the Day of Judgement, as set out in the Qu'ran.

They do not share our beliefs, such as the oneness of God and the supremecy of His laws, which makes us very different to them, and so we should teach our kids never ever invest any trust in them.

However, although they may even be hostile to Islam, each and every one of them is a potential revert insha'Allah (I fitted that description myself alhumdulillah), therefore we should try to represent our religion favourably, through our good manners, kindness, humility and peacefulness. We should teach our kids not dislike the disbelievers, rather, we should dislike their disbelief.

On a practical level, we must teach them to keep interactions businesslike and avoid close friendships. Things like laughing, joking, idle chit chat and gossip should be avoided, and of course inappropriate gender interaction is a big no-no and should be disciplined. But telling the disbelievers about Islam is incumbent upon all Muslims and should be a big focal point of our lives.

The Islamic dress code plays an important part in all this by identifying ourselves as Muslims, setting out a sort of barrier that lets them know we are different and that our priority is obedience to Allah subhanahu wa ta'alaa rather than consumerism or whatever moral code they follow. Therefore, introduce hijab at a young age, insist on Sunnah clothing and, as in all matters, set a good example yourself.

Always encourage children to keep the company of good young Muslim kids and constantly remind them to be aware of our very different beliefs. If you feel at all uncomfortable about relations that have developed with non-believing kids then insist that they are cut off - don't accept any whining about this. Only if you feel that they are open to Islam should you let relationships get a bit closer, for example by inviting them into your home.

Never ever forget the differences that exist and the dangers of falling into their corrupted way of thinking.

Insha'Allah this is of some help.