For me with no doubt in mind this would be felt. Felt is a non-woven fabric that is produced by matting, condensing and pressing woolen fibers.
1. It is strong fabric, nonelastic and is, therefore, ideal for learning hand sewing.
2. It is soft enough, that you can use a large needle. This makes sewing for kids much easier.
3. You can get it in many different colors.
4. Edges of felt do not fray, so seam finishes are not really required.
5. It is also perfect for learning to sew with the sewing machine. It helps you understand of how the sewing machine feeds the fabrics.
Of course there are also some other fabrics, that are also suitable for teaching kids and beginners sewing:
– 100% cotton (more firm ones), because it can be easily managed while stitching, as it sticks to itself without sliding,
– Polar fleece.
For small hands that are just starting to learn, I would advise needles that are long, have a big eye and not too sharp point.
For sewing, you may use ordinary threads or embroidery floss. Embroidery floss is especially ideal for more decorative hand stitching.
This is what I have learned to sew with my two little kids. If you have some additional tip for me, I would be more than happy to try it out.