In the first two years of life, small children should not sleep with a blanket and pillow as there is a risk that they could pull them over their mouth and nose during the night. A children's sleeping bag is the better and safer choice here.
When changing from a sleeping bag to a blanket and pillow, keep a close eye on your child for the first few days. If he or she tends to pull the blanket over his or her head, it is better not to switch yet and to use a sleeping bag again for the time being.