I built roads with traffic lights (yes, with the electrical wiring) with my son when he was 5 years old and a more sophisticated one when he was 7. To make it neater, we actually place the wires in the cable duct (using Lasy tube to do it). We bought wooden board, wires, LEDs, switches, buttons, etc. We also use Lego blocks and Lasy blocks to compliments the building parts. The light turns on and off manually when buttons are pressed. He knows the the traffic light rules.
The wires actually pulled all the way to a power plant where we build a small building for power generation engines, and power transmission station.
When he is older, it'd be cool to program the traffic light using a micro-controller.