Hello, the preschool years are when kids learn to enjoy a culture of reading and enjoying books and the treasures they hold. Mem Fox really sums it up in her book. There's plenty of time for phonics once they get to school. My DD (8) is now reading at the top of her class and it's purely because she's motivated to do so and spends time enjoying it! Have said that, at the first school they did Letterland which teaches writing as well as reading (but is a fairly expensive system) but in our second school they did Jollyphonics. Both were equally good but worked best in the classroom context where whole language was also used.
:-)
I'd say that reading to your kids and teaching them to love books is the best start. You don't necessarily have to use a particular "system" if they are interested in learning more. My DD (3 yrs old) recognizes her own name, mama, papa, oma, opa, etc., just from wanting me to write them for her on her pictures. She also knows all the alphabet from practicing "typing" on the computer. (she LOVES that!) She is learning the sounds that the letters make too, because I ask her sometimes when she is playing on the computer.
Some kids have a fascination with words and letters, and others don't. Don't push if it your child isn't interested, but if they are, try to find a way to make it a game. Rhyming and reading poetry are also great ways to encourage literacy in your child.
By the way, do you have the Leap Frog stuff for kids over there? That is supposed to be a great system for introducing kids to reading, in a fun way. I haven't tried it myself, but it seems to be receive great reviews all over.
You might be able to come up with some fun reading/letter games if you visit a teaching supply store otherwise.
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