The kids are such readers that they rarely look out of the window when we are driving, and that seems to have translated into no sense of direction. We live (in a subdivision) on a highway in the country between two cities, and are always going to one or the other for something. Often, our kids will ask if we can stop by a park in City B (west of us) when we are heading to City A (east of us).
Mr. Honey and I adore books so much that it never occurred to us to insist the girls take a break from reading in the car. After all, reading is such an important skill, and so many virtuous ideas come from books. We made sure they were only the best books.
"It was the best butter," the March Hare meekly replied.
Now we have "book-free" drives where the kids have nothing to do but look out the window or visit. (They sometimes use this time to play Twenty Questions with characters from books as the answers. Book obsession can be a serious problem.) We talk about the position of the sun and the time of day. We ride bikes in our neighborhood and get lost on purpose, relying on the sun and street signs (and a leader other than Mom) to get us home. We print out maps showing the location of violin lessons, church, the various grocery stores, friends' houses, all in relation to our house. We play road sign car games.
Since laying that groundwork, I have started asking the two older kids to direct me places as I drive. I follow their directions without deviation (following all traffic laws, of course). (This has led to some rather funny results! If you decide to do this, just be sure you don't have to get where you are going at a specific time.) We are still very much in this process, but both my older kids can direct me to and from church now-- although they continue to ask if we can go to the ice skating rink in City A after violin lessons in City B.
In writing this out, I have realized that we are missing a key component in learning a sense of direction: I have had them draw maps of faraway continents and countries, but I have never had them draw maps of their own community. Now I know what to do next.
Charlotte Mason said, "Children can be most fitly educated on things and books." We find books so fascinating, that the challenge at our house is to remember the educational value of things.