I had phonics, my brother had phonics. My sisters missed out due to phonics being out of fashion at the time. I know I am a better speller. We were all great readers, still are.
I do phonics naturally with my almost five year old grandson...have done since he was born. It's part of our every day play with songs, lots of rhymes, clapping, etc. He goes to preschool where they do the same kinds of things, always lots of singing and using creative aids, puppets and the like, to reinforce, BUT they do not push anything. Some fo them, including my Morgan, can write their names and name those letters, and they can all relate the ABCs, but they are just now starting to really work on visual letter recognition, etc. at his age, not for the slightly younger ones who are in the same classroom (it's big with many different learning stations/styles.)
He started reading a little bit in recognising signs...he figured out early on that "McDonalds" starts with the same letter as his name.:-)
Look for the I Can Read Books - Early Reader. I just got him several of them, including Dr. Seuss's "One Fish, Two Fish, Red Fish, Blue Fish." He loves the rhyming and the fact that he could "read" the first 8 pages almost immediately because of the visual aids. The sounding out comes naturally since he has always heard that from my daughter and me. Another favourite of his is about "Sheep in a Jeep." It's short and simpler than the I can read books.
Main thing is don't push; they get really excited when they are ready and you can tell.:-)