Patching and Plastering - Sealing exterior between house and basement

I apologize if I am posting this in the wrong forum. I wasn't certain where my question would fit in best...

I have a little gap between where my townhouse (wooden framework) meets the basement (poured concrete wall). Even though I can't see daylight through it, bits of the ground eventually and slowly funnel their way in. I would like to be able to dig down just a little bit outside and seal it. My question is...what would be a good sealer for where the wood meets the concrete? I could caulk it but what type of caulk would be best to use? Is there some type of plastic or paper that should cover over it as well? Any information would be greatly appreciated. Thank you!

Do I understand correctly that the outside grade is above the foundation?

If at all possible the grade should be lowered. If not maybe install some flashing.

Thank you for replying! I appreciate it! I would have to dig a little trench outside to get down to where the frame meets the top of the basement wall. I'll give the flashing a try! Thanks again!