Children live in the moment but by around eight – my daughter Aggie’s age – their thoughts stretch beyond next Christmas, beyond when they grow up and further into a future that outlives them. It can be bewildering when they begin to ask questions you can’t answer. Aggie’s current favourite: “When will the world stop?”

So it’s a joy to discover 24-year-old performance poet Toby Thompson’s beautiful first show for children (aged seven and up), directed by Lee Lyford. With wonder, wit and sophisticated storytelling, I Wish I Was a Mountain embraces big questions about time and contentment. This is a short but profound show, hatched by the Egg’s Incubator development programme, which reveals Thompson as a star in the making.

Aggie has already decided she doesn’t want to be a mountain: it sounds too cold, too high. She’d get a nosebleed. But Thompson, stepping in and out of his retelling of Hermann Hesse’s fairytale Faldum, riffing with the young audience and spinning a handful of jazz LPs, is about to convince her otherwise.

An early observation on the magic of vinyl and how its secret sounds are unlocked by vibrations sets the tone. Thompson is here to change our perspective on everyday life. Scattered around him on stage are wooden houses of different sizes, cleverly designed by Anisha Fields. Some conceal smaller houses with roofs that open to reveal props; one house pours sand out of its chimney, much to Aggie’s delight. Another home pops up inside a book.

By the time Thompson begins to tell us Hesse’s story, the stage has begun to feel like both his own home – where he potters around, from turntables to tape decks to piano – and the town of Faldum. It’s the day of the annual fair and people arrive from all over: Thompson lets us help set the scene through a game of I spy, a brilliantly simple touch. Soon, the model houses become market stalls and Thompson imagines this world so vividly that when he gestures to a stall in the distance, almost all the children swing round expecting to find it.

The words tumble out of him like an extended jazz solo as he describes the crackling energy of the fair, where a stranger makes wishes come true and the locals ask for cash and carriages. Thompson sidesteps Hesse’s jaundiced take on some of the townspeople’s greed and goes beyond the obvious question of asking the audience what they’d wish for. Instead, he asks them to imagine not needing wishes.

The last wish to be granted is that of a man who dreams of peace and contemplation, so would like to be a mountain. The story jumps far into the future – Thompson imagines how millennia “evaporate like pots of boiling water” – and the crumbling mountain still remains, long after there are no people left.

Still unaffected and playful, he considers this jolt in the story with the children. He gently gets them thinking about our choices, our priorities and what lasts in life. Aggie and I have seen much bigger, boisterous shows together but few have been so entrancing. This is a fairytale that doesn’t so much end happily ever after as ask us how the “ever after” affects our daily lives.

• At the Egg, Bath, until 30 September. Then touring.