Sagebooks Basic Chinese 500 is a great introduction to reading Chinese.

After set 1 and 2, your little ones are still excited to keep going but you're not quite sure how long they will keep it up?  Not to worry.  You can buy Set 3 and see how they do with the next 100 new characters.

Level 3 Building Reader includes 5 books, with 20 characters each, making it another 100 characters.