Read to the child every day. As you read, place your finger under the words you're reading; this will help the child associate words and sounds. Even if the child can't read yet, reading to him will help him enjoy reading and associate it with positive emotions.
Begin by teaching the child the alphabet. Write out the letters in order and name them as he watches. Teach the child the alphabet song to remember the letters.
Pronounce the sound of each letter and ask the child to repeat after you. Practice the sound of a few letters a day, but review the sounds of the letters he learned during previous lessons. Use example words when you're teaching the sounds to give context to the lessons. For example, if you're teaching the "c" sound, use the words "cat" and "cup" to apply the sound.
Present the child with short words he is familiar with. Ask him to sound out each letter until he can form the word. Assist the child as needed and help him put the word together.
Present a short and simple book to the child once he is successfully sounding out words. It's important to give him a book that has pictures and is about a topic he is interested in. Pictures and familiarity with the topic provide visual aids and a context for the child to follow; he can more easily determine what a word is based on its place in the book. For example, if the child is a hockey fan and reading a book about NHL trophies, he will be more easily able to figure out how to read "Stanley Cup" if there is a picture of the trophy in the book.
Practice reading every day. The fundamentals of reading are difficult to learn, so only through a dedicated mentality can a child become literate. Make this time as fun as you can. A bored child is not easily taught. Find online literacy games or help the child apply his reading knowledge to real situations, such as grocery shopping.