This is a RE-POST of my article from The Indian Magazine: ParentEdge: http://parentedge.in/fun-with-phonics-teach-phonics-in-a-fun-way/
Ideal Age: 3.5 years – 6.5 years
It is fascinating to see our children grow through their different phases and one such thrilling phase is when they begin to put words together into sentences. Next, they begin picking up sounds of letters to make more sense out of them.
In simple words, learning Phonics is about learning the sounds of each letter so that they can be put together to make a word. This means that instead of rote learning CAT with the letter C, A, T, the child would learn to ‘develop’ the word CAT by saying the sound of each letter as in C-A-T. Today we will learn simple exercises to boost your child’s phonic awareness in powerful ways.
I want you all to know that the activities I list here are the activities I do with my daughter sincerely and many of the activities in my articles are MY OWN ORIGINAL ACTIVITIES which came about with the need for ‘creative play’ with my daughter to teach her more by spending less!
ACTIVITY ONE: The first step is to get your child interested in the alphabet per se. We need a magnetic surface and magnetic letters. Place toy letters on the fridge top or a magnetic surface to attract your child’s attention. Playing A-B-C nursery rhymes and showing them letters in their environment makes them more aware that letters give meaning to our world. When we are waiting for our train ride, or parking at the airport, my daughter and I have fun playing I Spy and spotting letters.
ACTIVITY TWO: We need lots of blank white paper, a dark color marker, and some cello tape. We are going to write names of simple objects around the home and then stick the paper on that object. E.g. Write DOOR in big bold letters and tape the paper on any door. Same with Fridge, Wall, Chair, Table, and so on; this helps your child associate words and letters to objects in their environment and learn spellings at a later stage.
ACTIVITY THREE: We need some wooden plain blocks, (preferably rectangular) and a marker. Along with your child, write the name of each of your family members on a block. Encourage your child to place that name block on the dining table assigning each family member a place to sit. This way the child learns to spell names and gets more involved in mealtime preparation.
Another alternative: take more blocks and write one letter on one block to spell out names of all family members. This is an advanced version in name spelling and can create a lot of fun for your child especially if s/he likes challenges.
Below you can see I have used the same block to write both words on opposite sides. This way my daughter learns the spelling of and associates both the words. Similarly, you can take 3 cubes and write M on one, O on the other and M on the 3rd one to help them spell it out literally by themselves.
ACTIVITY FOUR: This is my daughter’s favorite activity. We began it when she was 4.5 years and now 7 months later she enjoys it just as much.
We need – pencil, paper, eraser, you and your child in a place comfortable enough to write.
Pre-requisite: Child must know sounds of each or at least some letters and must know how to write them.
Aim: To help your child spell a word, write it, and then draw a picture of it.
How to: You will begin by thinking of a word, let’s say STAR. You will now tell your child that you are going to spell out the word for him / her by saying the sounds of each letter in your word. Begin with ‘S’ (just make the sound of S, don’t say S). Your child has to guess which letter it is and write that letter on the paper. Next letter is ‘T’ (Just the Tah sound) and so the child guesses and writes T. In this way, you finish S-T-A-R and then allow your child to guess what the word if. If s/he cannot get the word, you say it for them by putting the sounds together like ‘St’ ‘ar’ = Star. Now s/he must draw a star in any way s/he can.
Remember, it is ok if the word letters and pictures are not aligned or in order. The presentation is not important here, the learning is!
Below is my daughter’s paper at age 4.7 years. She spelled and guessed all of the words below and drew pictures. Mostly we do this when I am cooking in the kitchen, she sits nearby, and we enjoy the game together. 
My other articles from ParentEdge magazine:
Rima Desai's: Scuba Diving into the Mind's Pool 