Teaching phonics does not have to mean an investment in expensive programs like Hooked on Phonics or A Beka phonics. Now I love A Beka phonics and I have been using it for years for each of my children. The initial investment has been well worth my money as I continue to use it year after year with my six children. However, if I had not already made this investment you would find me using a wonderful free website found at Starfall.
This program allows children to use basic computer skills (operating a mouse) to learn the letters of the alphabet, play some matching games, and teach them the phonetic sound. There is also a great workbook in two different handwriting fonts you can download to accompany this learning. (you will need adobe acrobat) Even if you are not on a tight budget I would seriously check this out.