This simple project helps children learn the shapes of the letters. It will help them develop writing and reading skills. Working the play dough develops fine motor skills that will be used for writing as well as hand eye coordination. While they put the play dough onto the letter tell them the letter name and the sounds it makes. This will help them associate the sound of the letter with the shape giving them the skills they will need to sight read.
It is important to introduce literacy at an early age. You can do this by exposing them to print in multiple areas of their life, such as letter magnets, books, posters with words, and songs about letters.