The ability of a child to use reality to fulfill his wishes is very limited. The external world is always a source of frustration. But daydreaming allows a child to see the world as a place in which he can achieve what he wants. You can be whoever you want to be if you could choose the place and time of your birth. It's the ultimate control.
Daydreams are wonderful channels for creativity.
There are no limits here, and a child's mind can create whatever it can conceive. Humanity's biggest creative geniuses are known to have daydreamed a lot as children. It's even better if you can share their daydreams with them. But in order to share in his fantasy, you have to be in one of your own. This is hard for adults to do, but it's very important.