SA600 instructor pilot with student reports electrical failure followed shortly by engine failure. Unable to make it back to departure airport; reporter elected to land on state highway whereafter no damage or injuries were reported.

Narrative

During climb out with a student pilot at the controls; we experienced slight perceptible smoke in the cockpit accompanied by a burning electrical odor. I took control of the aircraft; declared an emergency with Tower and obtained landing clearance while executing a 180 degree turn back toward the airfield. Shortly thereafter; we experienced an electrical system failure; followed a few seconds later by an engine failure. After considering emergency landing area options; I elected to exercise PIC emergency authority and land on a highway - with only 700 to 800 FT AGL to work with; this seemed the most appropriate course of action. In prioritizing my attention and actions from the point of engine failure to touchdown; and given our low altitude; precarious nature of the emergency landing area; and concern associated with a potential electrical fire; I did not engage in the application of any emergency procedures outside of managing aircraft energy state and flight path. Aside from emergency services activity and media attention; the landing was uneventful and resulted in no injuries or damage to the aircraft or property on the ground.