Vocabulary is important for speaking and communicating, but it's also essential for reading. It's the key to solid reading comprehension - it's impossible to read and understand a text if you don't know what the words mean!
When reading a text, we use our vocabulary knowledge to decode what the text is telling us. With a limited vocabulary, it'll be difficult to understand most of the words. This will restrict the overall understanding of the text.
Reading is also what helps to grow and expand a person's vocabulary. The more a person reads, the more vocabulary they'll know. But while a child is still growing their vocabulary, it's important that they're given a text at the right level - one where they'll understand most of the words, but there are some new ones to challenge and grow their vocabulary.