Whether or not it is too early depends largely on your educational philosophy. You mention your "students" so presumably you are teaching as part of a school. In this case, the parents enrolled their children based on an idea of the school's philosophy. That philosophy should guide your teaching.
By age three, most children can recognize some letters. So, developmentally, they are prepared to recognize the letters of the alphabet.
However, there are philosophies that believe in delaying formal instruction until later, focusing instead on play, manual dexterity, or outdoor exploration at this age.
Most schools take a middle ground. Most of the time is spent exploring opportunities for open-ended play and art, as well as storytelling. Puzzles and other toys with letters are available for children who are drawn to these. The teacher may have a letter of the day and practice phonics with the students, pointing out familiar animals and objects that begin with these letters.
Some schools introduce formal academics very early and use worksheets and drills in order to prepare for the increasingly academic kindergarten programs. Research has shown little long-term gain from this form of education but there is definitely a market demand for it and so there are schools that offer this method of instruction.
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Candace Lindemann, Ed.M. - JustAsk Expert
Educational Consultant and Writer
http://NaturallyEducational.com