Familiarize your child with the alphabet with letter blocks. You can do this even before he turns 1 year old. Start with more recognizable upper-case letters such as A, B and C. Point to each letter and say its name clearly while making eye contact with your baby. As young children are prone to distraction, spend no more than 10 minutes each day showing your baby the letters, but make it a daily habit. Make sure you make eye contact with your child as you are reading him the letters to focus his attention on the task at hand. Show your child three or four letters at a time -- after he has mastered them, move on to the next set of letters until he has learned all of them.
Move on to the lower-case letters. Point out the connection between the same lower and upper case letters. If you work at it every day, your child can master both upper and lower case before the age of 2.
Teach your child the vowel and consonant diphthongs, such as "ai" or "th". Use letter blocks or everyday objects.
Reinforce the sounds of the letters and diphthongs by reading them aloud whenever you encounter them in your child's natural environment -- on items such as cereal boxes, T-shirts and road signs.
Begin showing your child sight-word flashcards. These are cards, for instance, that say "cat" along with a picture of a cat. Reinforce the "ke" sound of the letter C by saying "C is for cat". Or you can point to a letter and ask your child "What is this letter?" If your child doesn't respond, urge him by repeating "ke -- ke as in cat". Do this for each of the letters in the word cat until your child can identify the sound that each of the letters in the word makes. Soon enough, he should be able recognize that the letters C-A-T make up the word cat. Use this process for each flashcard until your child has mastered them all.
Move on to reading extremely simple story books with your child. Pause periodically to ask him which of the words he recognizes when you are reading the story to him.