Children have an impressive understanding of categories by age four. They can grasp the distinction between appearance and reality, they use names as a guide for making inferences, and they realize that growth is a natural, orderly process. To some extent, even two-and-a-half and three-year-old children show some of these same early understandings. However, there are also developmental changes during the preschool period (especially between two-and-a-half and four years of age). The youngest children are apt to have more difficulties with the appearance-reality distinction, are less apt to form spontaneous generalizations using the categories they have and are easily confused about the growth process.
Children’s early categories are tremendously important tools for young children and have implications for how they view the world. Like any tools, categories can be used in either useful or inappropriate ways. Some of the dangers in early categories are that children sometimes take names more seriously than they should and draw overly broad generalizations based on the categories they know. Overall, the effects of categories are positive. Children make use of categories to expand their knowledge. By simply naming objects we can encourage children to notice how different items are similar and help children gain new information about the world.
Furthermore, because children expect items in a category to be alike in nonobvious ways, they can learn about "scientific" properties (such as the insides of an animal) well before kindergarten age. Both of these implications illustrate that categories are the foundation for later learning in school.
("Categories in Young Children’s Thinking," by Susan A. Gelman. Young Children, January 1998.)
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