For my niece, I picked up Knifty Knitter looms (with JoAnn's 50% off coupon) and yarn as a basic way to start doing some yarn-based stuff. She's going to be 7 next year, and I figure this will get her started, and when she has a bit more dexterity I can teach her how to crochet.
Since I've only seen other people using the looms, I figure I should probably learn how to use it adequately before I teach her how to to do it. YouTube! has a plethora of instructional video (and almost everything else under the sun) about loom knitting, so I picked up the basics.
And, OMG, the stuff you can do with this thing! I might have to pick up a set for myself (after waiting for another JoAnn's 50% coupon)