During the first year, infants become better at discriminating speech and language sounds, turning to the source of sounds and responding to the sounds you make. They can understand their first word as young as 5 months.
By 12 months, babies are following simple one-step directions such as "sit down". They may be using their first few words but also commonly use gestures to communicate.
By 2 years toddlers are typically using at least 20 words and responding with words or gestures to simple questions. They enjoy being read to and looking at simple books with you and "reading" to their stuffed animals or toys.
By age 5, children have essentially mastered the sound system and grammar of their language and acquired a vocabulary of thousands of words.