Arin has known her letter sounds since she was very little (in fact, Ella knows some of her letter sounds as well), and she has been able to memorize some words for a very long time as well, but we are now trying to focus her on actually sounding out words so that she will be able to read on her own. We have been mainly focusing on the "-at" words. It seems like as good a place as any to me to start. We recently found the site Reading Eggs, which Arin has been enjoying (we are using the free subscription right now and it does not start with the -at words, so she has had other exposure). We also like Progressive Phonics, which is a free site. Right now, we are practicing only the -at words with their materials and Arin loves that she can read parts of the books. I read the words in black and she reads the words in red.
To supplement those sites, we have been playing many reading games as well. Today, I made a 4x4 grid, using sidewalk chalk on our driveway. Inside each box, I wrote one -at word.