Rainbow Fish by Marcus Pfister isn't terrible, but I think that it could be misinterpreted by a young child. It's teaches the virtue of sharing, but implies that it's possible to buy friends by giving people your possessions. We have a copy in my house, but when I read it to my toddler, I change the words so that Rainbow Fish sells his scales, invests his earnings, and becomes "the richest fish in the sea."
What do you consider to be the worst children's book?
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