Use repetition. Reading a series of stories about the same characters over time will fuel the child's imagination and help cognition as he recognizes familiar names and places. Use illustrated stories to capture his attention. Stop and ask questions at the end of each story, such as, "Why was the boy happy?" Draw a picture with the child that depicts the word "happy."
Improve the child's vocabulary by checking that she understands a new word in the story. If she does not recognize a word, offer alternatives so that she begins to find similarities in meaning. Use expression in your voice when reading so that she learns appropriate reactions and responses to different situations. This helps to develop empathy and emotional intelligence.
Take the child to the library so he can choose books with short stories. He may also enjoy going along to storytelling sessions. Record yourself reading a favorite story (or a grandparent may like to do this) so that the child can listen to it in the car.
Write a short story with the child. Base it on some of her friends or her family, or even her favorite toys. This will stimulate her imagination and also improve her use of words and construction of sentences.