Really it helps in enhancing their art and creative thoughts and thereby expanding their memory which could later in their lives develops or paves the way for some wonderful hobby or career of their own..
Any activity that involves working with their fingers, in this example working with clay, helps improve a child's fine motor skills and improve brain functions. It also helps build creativity and imagination in a child.
Along with clay modelling giving children paper to play with, even a simple act of tearing it to pieces, folding it in various ways etc. achieve the same result.