Yes, phonics is very important, and a child must learn it sooner rather than later. However, that doesn't mean that whole-word reading has no place. We discussed this issue here:
http://www.brillbaby.com/teach-baby/reading-whole-language-phonics.phpbtw, many children intuit phonics rules themselves, picking up word patterns just like they pick up speech patterns. The question is how easy you make it for them to pick up the rules, which is why we designed our Pattern Phonics system in Little Reader to do that.
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