Yes I absolutely agree, these things in childhood become touchstones. I had a favourite sleeping bag when I was a kid and did the same as your little one - took the thing everywhere with me. It was such a comforting thing for me, used it until it was practically falling apart and then I think my mom decided it had to go when I was a teen 😂
It's a fun time of year for them and even though I'm more like the Grinch than Elf on the Shelf, I like that they enjoy celebrating it. Hope you'll be having a good one 😁