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This is a fun alternative to the traditional reading log. At the beginning of the month, I send home a parent letter of explanation along with 1 or 2 sheets of circles. I explain to the students that for every book (or chapter) they read, they can fill-in a circle to be added to the classroom display. I include books that are read to them, as well as books that they listen to online. However, you can set the parameters that you want for your classroom. I also ask the students to cut out each circle, and the parents to initial the back of each one.
To make it visually interesting, I print the circles on different colors of cardstock. I also give an added incentive by setting class goals along the way. For example, I mark a point on the wall and when the caterpillar reaches that point, the class earns an extra recess or a guided drawing break.
The ultimate goal, of course, is to get the caterpillar to go all the way around the room. For this purpose, you may want to consider this a 2-month goal.