I was browsing through Soulemama's book - the Creative Family, when I came across a picture of her 3 year old son doing embroidery. I showed the picture to Adam. It didn't look like he was paying any attention, he was doing something else at the time. 10 mins later, he came back to me, saying he wants to do 'knitting' and pointing to the book. 'Aaah, you want to do embroidery?' 'Yes!' he said.
I already had all the simple tools on hand. An embroidery loop, some big nearly blunt needles, cotton embroidery threads in many colours and blue linen (emphasis on the blue as its favourite colour and always held his attention no matter what the activity).
He chose what colours he wanted, i threaded the floss and made a knot and he did the rest. Very quickly, I might add. He was very excited at the prospect of choosing his own colours and mixing it up. He said he was making lots of Xs.
I didn't even have to show him how to work the needle. I was surprised that he already knew how to. I did have to watch for the floss getting caught with the fabric etc...he asked for help when this happened, but mostly I just watched and took pictures...
Knitting might be a bit hard to master at this age but embroidery is pretty simple and gives them a feeling of satisfaction at the finished product.