My toddlers (daughters) like to wear nail polish and lipstick. It is because I wore them in front of my daughters. Normally I like to do my manicure and pedicure out-of sight of children which currently is not possible. If wearing lipstick and nail polish are not appropriate or hygienic for them I will stop wearing them. Is this an issue?
I agree with the first paragraph of Willow Rex answer. I disagree with the part making this a lifetime issue.
My niece is 7 years old. She loves to dress up as a princess with child appropriate make up in her free time and engages is sword fights with her older brother. This doesn't automatically make her want to wear make up in school.
If your children want to dress up as "mom" let them! You are their role model and they want to be like you! If they want to start wearing it before leaving the house tell them they can play "dress up" when you get home. It will make it clear that it is a game and not a casual thing. You don't need to stop wearing it, if they question you being able to go out with it tell them that it is an "adult thing" to do, like driving a car.
And to answer your question (when to allow it): Whenever you feel comfortable (for example at home) or when they hit a certain age where you feel it is fine. This is usually somewhere in puberty. That being said: I would never tell my child to not wear make up as soon as she is old enough to buy it herself and if she doesn't overuse it.
If wearing lipstick and nail polish are not appropriate...
When do you want them to wear make-up and/or nail polish? That is when it is appropriate, and that is when you should allow them to use such products.
You probably drive, an perhaps drink alcoholic beverages. Toddlers may want to do this too, but they can't, because they aren't old enough. Even if it were not illegal, you would not allow it.
But lipstick and nail polish isn't very harmful, so it's your call. Kids should have something to look forward to, though. My point is that just because you do something doesn't mean they should as well, or that you should give it up if they can't.
If wearing lipstick and nail polish are not... hygienic...
It is about as hygienic for them as it is for you.
There are kid's lipsticks out there -- lip balm and lightly coloured sun protection for lips. IF you are concerned with germs, get your toddlers their own lip balms.
I'd be concerned with them chewing off the polish, but as many adults do it, I bet it isn't that big of a health risk. It might even help prevent them from nail biting or thumb sucking if used as a positive reinforcer.
This is your decision. You are the parent. If you like makeup, it is a compliment that your children want to be like you. My mum wore makeup and the only time I did was on Hallowe'en -- no little girls would have been permitted before 16. That isn't right or wrong. It was the time.
In the elementary school where I taught, girls as young as 6 wore some makeup -- usually coloured lipgloss. They also had light nail polish and fake tattoos. I have no idea what they are doing now (7 years after I retired).