Writing is an important part of reading. With little hands it is hard to have the grip a standard pencil requires as well as most toddlers not having the coordination to properly hold a pencil. An alternative to this is a Q-tip! It is the perfect size for small hands.
A writing activity I have done with preschoolers involves paint, construction paper and the Q-tip. Write out their name on a piece of construction paper, squirt a quarter size amount of paint on the side of their paper, and have them dip the Q-tip in the paint and trace their name. You can do this with the entire alphabet, numbers or words. This encourages letter knowledge and handwriting skills.