First of all, I don’t think we can even think of “gender identity” with such a young child. Life to these children is quite matter-of-fact. I have a penis, you don’t; I have a vagina, you don’t. It is important at this age to be quite comfortable with naming body parts and the words used to denote gender are as simple as words denoting other body parts. Just as we would not use some “cute” word to denote mouth or finger, we would not use cute words to denote penis or vagina.  

It is critical to remember that for this young child, life, concepts, words are pretty straight-forward and based on what the child can experience sensorially. I can see you have a penis and I don’t—though most toddlers won’t really say that but they can observe that.

A young child’s questions around the body and body parts should be answered quite matter-of-factly; “that’s just the way things are”.

Issues around gender identity tend to begin around 5 and continue to manifest as the child gets older; their social circles become wider, their experiences with the different ways life is lived increases, their reasoning mind is functioning. Adults in the lives of these children need to be aware of their own issues around gender-identity and not create an emotional environment where there is shame, questions, doubts created.  

Even questions regarding the composition of families is not questioned by the child under 3 - two parents of the same gender is not an issue for these children; those questions come later.