Here's the whole idea in one breath: energy is never made and never destroyed — it's only transferred from one place to another, and transformed from one form into another. That law has a name — conservation of energy — and it's the single most important sentence in all of physics.
Take a Torch on a Dark Night
Flick a torch on. Light pours out — so where was that light a second ago? It wasn't being stored as light. It was sitting inside the battery as chemical energy, packed into the substances the battery is made of. Press the switch and the chemical energy turns into electrical energy that flows down the wires, and the globe turns that into light (plus, sneakily, a bit of heat). Nothing was created. The same lump of energy just changed clothes three times on its way out.
The Forms Energy Comes In
Energy wears a handful of costumes, and most of physics is just spotting which one you're looking at. Kinetic energy is movement. Thermal (heat) energy is the jiggling of particles. Light and sound travel out as waves. Chemical energy is stored in food, fuel and batteries. Gravitational potential energy is stored by lifting something up high. Elastic energy is stored by stretching or squashing. And electrical energy is carried by a current through a wire.
A change is just one of these turning into another. A wind-up toy stores elastic energy in its spring, then lets it go as kinetic energy and a faint buzz of sound. A car burns petrol — chemical → kinetic + a lot of wasted heat. Drop an apple and its gravitational store turns into kinetic as it falls. Once you can name the forms, you can read any change as a chain of one becoming the next.
Build a couple of chains in the toy. Pick the torch, the kettle, the wind-up toy or the car, drop the forms into order, and watch it confirm the path — and flag the heat that always leaks out somewhere along the way. That leaking heat is the loose thread we pull on in rung 3.