Build your characters. What I like about this stage is that you have the ability to make a story about anyone. Kids can create characters other than virtual versions of themselves (if they choose).
Step 4: Create your story. The illustrations within the stories allow for editing. Changes in character sizes and locations can be made as well as the ability to add some scenery (flowers and rocks for the camping story). Now, any parent of a 5 year old knows that 5 year old decoration philosophies tend to lean towards "the more the better!" So, you may need to decide how much is too much - or not.