Water-based acrylics and latex house paint work best on styrofoam.
Polystyrene foam is highly susceptible to solvent based petroleum products. When paints with oil in them come in contact with the surface, pitting and corrosion can occur. Water-based paints will not pit or dissolve foam, but you will need paint with enough solids to adhere to the slick surface of the foam.
Acrylic Paints
Acrylic paints, such as those used by fine art painters and crafters work well on styrofoam. They come in a wide variety of ready-made colors and will readily adhere to the surface. Choose from flat or gloss finishes. The one drawback is quantity, since craft paints typically come in quart-sized or smaller containers and foam projects can require a lot more. Acrylic works well for small to medium projects.
Latex House Paint
Latex house paint is made from an acrylic latex similar to that used for acrylic craft paint. House paint contains more solids, can be custom mixed to any color through computer color matching programs and is available in up to five-gallon sizes. Latex is probably the best paint for its covering properties and easy availability. It can also be used as a base coat over which standard spray paints and oil-based paints can be applied.
Tempera Paint
Another kind of water-based craft paint known as tempera also adheres well to foam. It is only available in a limited number of colors and does not blend well enough for more subtle shades to be created. It is also only available in a flat finish. Tempera stays water soluble even after it is fully cured, so foam projects that may get wet should not be painted with tempera.
Water-based Spray Paint
Although standard spray paints can be used over a latex or acrylic base coat, water-based aerosol spray paints can be applied directly to the foam's surface. Spray paint allows blending and fade techniques that are not possible with rollers or brushes and has an unequaled smooth coating. The limited colors and relative expense of water-based sprays make them impractical for larger projects requiring a lot of paint, but they are ideal for applications on foam.
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