We often tend to discount the little one a lot, much because we underestimate their abilities. You must know that your child is watching everything around them more closely than we are. They may surprise you with their observations, and they do remember things.
Children can remember things, and have processes a little similar to what we have. Only, it works in a slightly more limited capacity, and grows with age. There are three systems of memory, which also exist in the child’s memory process. They are sensory memory, short term memory, and long term memory.
Sensory memory has a lot to do with what we have around us. It refers to smells, sounds and sensations around us. It does not play as important a role as the other stimuli that are received.
Short term memory is what is being processed at any given minute. There are only certain amounts that one can deal with at one time. This is a little smaller in children, and you should only be introducing one new concept at a time, or the child will have an overload of information, and most or all of it will be trashed out of the system immediately. It is only when there is constant re-enforcement and repetition that the child is able to commit it to memory.
Long term memory is what has been stored permanently in the mind. This information will be used over and over again as and when it is relevant. This information is retrieved and re used when required.
Children have all these kinds of memory functions in their systems as well. They may differ in the kinds of information they can process, but it exists none the less.
Parents and elders normally tend to believe the child is not following and remembering what is around them. This is because they are unable to use the information or articulate it using words. The child may be able to remember, but they are unable to use it for other processes. He will not be able to connect it with other mental processes till the age of three.