I wasn't concerned with my child, I was more concerned about how others behave so we got a pull string one. It was still fun and all the kids care about is the candy.
We've had a pinata for birthday 1 and 2...not for 3. We had the pull string kind so there were no bats flying. There were some older (3-6 yrs) there so they understood the concept. Just so happened when DS was 1...HE was the one that pulled the string that opened the "trap door" and all the candy came falling out.
We had one at my twins' bday party (they turned 3) and all the 2-3yr olds did fine taking hits (all kids had to be seated over to the side if it wasn't their turn). Once all the kids had had a turn and the older ones had it closer to breaking, my brother did the actually bursting of the pinata so everyone could go after the candy at the same time. Worked fine for us.
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Re: Is 3 too young for a pinata?