In our home, we love to make stories come alive. By this, I mean I will start a story...then I will ask my daughters "what happens next?" I just move my hands to show them that they are next in coming up with an idea to help complete the sentence. We have the best time coming up with some really wild stories, but we just laugh about it when we are done. Sometimes we talk about rabbits going roller skating or penguins riding a bicycle on a walking trail. Really, right now, I think it doesn't matter where the story leads...they are having fun creating a story of their own, when we combine each others imagination together.
One thing that we just started doing is having our older daughter draw pictures in her "journal". Knowing later on that we are going to be putting words on the opposite side of the drawing. For example, she drew our family...but turned them into being a king, queen and two princesses along with our three cats (who are the boyfriends/princes of the princesses - pretty hairy boyfriends eh (ahahah)). But the thought behind this is that she is drawing an image, thinking of what the story line is going to be and then creates it...each page is a continuation of the next. After the story is done, on the front cover of the journal she is going to draw a front cover with marker or crayons.