Hi C.,
I was a 3rd grade teacher for several years before I quit to stay home with my kiddos. Funny thing was is that I never taught a kid how to read --in 3rd grade they mostly knew how to read, I was more teaching comprehension. I began to research and talk with other mothers and found the most wonderful book. It is called: Teach Your Child to Read in 100 Easy Lessons
by Siegfried Engelmann, Phyllis Haddox, Elaine Bruner, Siegfried Engleman, Phyllis Haddox
It starts very slow just teaching letter sounds and brings them up to a 2nd grade level in 100 lessons. The great part is that it tells you exactly what to say - it like gives you a script. We had so much fun with it. At the end of each lesson, there is writing lessons to teach them to properly write their letters. The lessons only last 15 minutes each - perfect for their short attention spans. My daughter is now a fluent reader in Kindergarten and is even now taken up writing her own stories.
There is a DVD called the letter factory by Leap Frog that is great for teaching phonetics. Even my 3 year old is learning her sounds in a "fun" way.
Hope this all helps. It is a great bonding time when you are teaching your child to read. It is something they will never forget as the 2 of you sit and sound out those first words and you see their little eyes light up and the light bulbs come on! Good luck, have fun, and pack a lot of patience!
M.