In the process of painting you focus your attention on a subject that is at your fingertips. If you do it with enough concentration, it will ignore the extraneous noise, unpleasant thoughts and worries. This is a very useful skill that will be useful in situations where you need to briefly forget about your physical or emotional pain.
You should pick soft triquetrous pencils for a small kid. It is sufficient to have a set of six basic colors. When coloring, try pronouncing the name of each color, this helps the baby to remember them.