I often thing, personallly, that whilst reading books/articles is good it doesn't help instill a lot into a young hacker.
First I would buy him Kevin Mitnicks books. I recommend them to every new hacker because: a) some of the stories are unbelievably inspiring! b) it's all real life stuff c) he manages to tell the stories of these great hacks without glamourising the illegality. It does a lot to prove hacking can be great fun within legal bounds.
The next thing I would do is encourage him to get involved with a programming community. Get him to learn a language and start ot play with it. :)
in terms of cracking (as opposed to hacking) sometimes pushing the boundaries happens (either for personal reasons or professional). I would teach your cousin that breaking the law is wrong. Breaking into the schools system is (speaking technically) as bad as breaking into a microsoft server. But the impact of the 2 activities (assuming it was simply to look both times) is very different. Try to show him that experimenting with something like the school system is fairly harmless but still wrong and he should take it no further unless he has permission :) (offer the school a pen test :D)
Finally a lot of people are saying "teach him not to get caught" (essentially). This is a most important lesson. I crack for a living (White Hat I hasten to add) and one of the things that makes me good at that is paying attention to covering my actions :)