Children as young as 2 1/2 to 3 years old enjoy and benefit from playing with Key Words. This page discusses how the basic Key Word process might be modified for use with preschoolers. It will make more sense if you first read through Key Words & The Steps.
It will also help you — before you begin with a child — to read A Natural Approach. Having this foundation will help you make decisions about modifying Key Words for your child.
After you that background information, following are a few things to keep in mind as you proceed.
Guidelines: What to Keep In Mind
A preschooler will begin to go through the same beginning Steps as an older child, but more slowly. All decisions should be made to ensure they are comfortable as they go at their own pace and in their own way. So in no particular order, following are a few things to keep in mind.
A Key Word is the caption for a mind picture. Be sure the child is actually thinking about/envisioning the word you’re about to write. Give them plenty of time to talk about it.
Be very careful not to pressure the child in any way. Pressure sets them up for failure, not only now, but later. Pressure of any kind can be extremely destructive. Failure to do what you want/expect can cause a child to become confused and lose confidence with print. I have seen that lack of confidence is one of the main reasons children have a problem with reading.
Everything you do with Key Words is meant to feel like PLAY for the child. You’re NOT teaching them, you’re letting them see what you do when you write. When faced with a decision of how to show them something (like phonics), think back to how you helped them learn to speak. You didn’t teach them how to speak — you casually modeled it for them in connection with something that had meaning for them.
Each child needs to go at their own pace and in their own way. Just as with every other living thing, a child will develop according to their ow inner timetable. While they benefit from seeing what you do, they will take their own sweet time absorbing what they see. Then they will begin doing it themselves — when they are ready.
Give only ONE Key Word a day. More can become confusing. But their Key Word can be more than one word, such as “birthday cake” or even “ice cream cone.”
Acknowledge their work, but don’t equate it with their value. When they accomplish something, avoid leaving the impression their personal value comes from the quality of their work. In other words, avoid saying, Good boy/girl! Say something like, Good job! Yes, that’s right! I see you did that very carefully/put everything away — that’s a good way to work.
Modifying Activities For Skill Development
1.Expect different children to approach practicing skills differently. As they work with Key Words, their natural inclination is to copy what they see you doing. Trust that and let them proceed in their own way. Some will jump right in and start trying to write. Others will watch and simply absorb what you’re doing for awhile before they try it.
Take letter formation, for example. First you simply write the word. Once you see they’re especially interested, try showing them how to trace over the letters with your finger. Ask them to try it. Some may use their index finger, very carefully — just as you did. Another might just swipe over the entire word at once.
Still another may point to each letter with the eraser end of a pencil, rather than their finger.
Accept whatever they’re doing. Just continue to trace over the letters with your finger yourself after each time you’ve written the entire Key Word. Say the names as they watch you write and again as you trace.
At Step 2, they will begin dictating a sentence to go with their Key Words. Don’t ask them to trace over the words in the sentence. That’s too much work!
2. Drawing Skills. Lack of motor skills shouldn’t stand in the child’s way. Instead of drawing what the word is about, a younger child can “play” with the words. For example, if the Key Word is their doll’s name, have them tell their doll about it and put the Word Card in the doll’s lap.
If it’s a toy of some kind — place the Word Card on/in that object for awhile. If the word is ice cream, have them put that Word Card in the freezer for awhile — joking that it will otherwise melt. Or if the Key Word is some kind of food, have them pretend to feed the Word Card to their teddy bear. In other words, have them focus on connecting the meaning of the Key Word to a real object or action. 
3. Copying Skills. Lack of motor skills also shouldn’t stand in their way of copying their Key Words. Show the child how to use a Montessori-style moveable alphabet — on a small rug. Or use a set of magnetic letters on a cookie sheet.
4. If your child is enjoying Key Words, but not recognizing the old word the following day, it’s too early to use a Word Ring. Instead, try placing 2 of their latest old words on the table or floor. Then say one of them and ask them to hand it to you. Then repeat with the other one. When that’s easy, next time add a third. Keep playing with them in this way, slowly increasing the number.
5. Once #4 is too easy, show them their word from yesterday and ask what the word was. If they recognize it, then put it on a Word Ring. Try it with other old words that you’ve until now have simply been asking them to hand you. But be sure none go on the ring that they don’t immediately recognize.
6. As your child grows, eventually check to see if they’re ready to create a Writing Book, with one page for each Key Word. If you’ve seen them at other times try to draw/paint, suggest they draw what their word is about. For them, at this point, that may 
only mean drawing a line or painting a blob on their paper.
Accept that and listen to what they say about it. If the mark they’ve made really does — to them — represent their “mind picture” of the word, then make them a duplicate of their Word Card and help them paste it on their painting/drawing.
Or — you can simply write the word next to the blob, with an arrow pointing to it. (Notice if that makes sense to them. If so, do it again during the next session — if not, drop that idea.)
Once they have a few pages with the duplicate of their Key Word glued onto each page, and/or words written directly on them, make a “Writing Book ” out of those few pages.
Use colored construction paper for the cover. Write their name and the date on it, and let them decorate it. You’ll find it a treasured item later. Sit with them as YOU read the book back to them each session. (Do not expect them to “read” it.)
7. If they don’t recognize a word the next day, just casually set it aside. If you run into problems with this, see some ideas for what to do.
As with a child of any age, have them “read” the words on their Word Ring at the beginning of each new session. Take off the ring any word they don’t know: One of the worst things you can do is keep words on their Word Ring they don’t immediately recognize. This undermines their confidence.
If that happens repeatedly, but they enjoy getting a word, there’s no need to be concerned. They are just taking their time absorbing connections — in the same way some toddlers delay talking beyond when others begin. Just take plenty of time talking and playing with each new word.
But if they’re not enjoying it, stop doing it. Wait for awhile and try it again. Another of the worst things you can do is keep working with Key Words if they aren’t enjoying it.
Perhaps they’re feeling pressure to do it, so that’s turning them off. But if not, then perhaps they simply are not yet ready for it. Just as with walking and talking, they have an inner timetable for working with print. So drop it and try again later.
8. Until a child is around 3 1/2 or 4 years old, let them hold a pencil or crayon in any way they choose. Then, see this activity called, “Alligator Mouth” that helps you introduce a child to the correct way to hold a pencil.