"Prehistoric humans discovered the useful properties of clay, and one of the earliest artifacts ever uncovered is a drinking vessel made of sun-dried clay" ( http://en.wikipedia.org/wiki/Clay )
Even children as young as two enjoy manipulating clay- a material that has been around for thousands of years.
Clay is an inexpensive material, and if stored correctly can be used countless times. There is no need to fire it unless you have access to a kiln, children will enjoy building and creating objects which can be shelf dried, or squashed down to be re-used.
In these photos I was working with some 4 year olds who were using a small block of air-drying clay. We used metal and plastic spoons and cotton buds to create texture and detail, and a heavy rolling pin to flatten to clay.
Remind children to join pieces firmly as if they are too thin they will fall apart when dry.