Flashcards are avaliable everywhere, they just have a letter with a picture next to it, for example A with a picture of an apple. Use this to build recognition of the letters and sounds they represent. I prefer to teach the phonetics rather than the name of the letter as in aahh, bbbb, kkk vs abc. From aahh for apple to what other words they can think of that start with ahhh. I bring in the abc once they have the phonetic down. I refer to it as the name of the letter is A, the sound of the letter is ahhh.
I bought a set at Costco. If you have time and inclination you could even make some with your child. This is fuin and can take a couple of months.
The book "Teach Your Child to Read in 100 Easy Lessons" is $15.00 new and under $10 2nd hand and avaliable here: <AMAZON id="0671631985" url="http://www.amazon.com/Teach-Your-Child-Read-Lessons/dp/0671631985">http://www.amazon.com/Teach-Your-Child-Read-Lessons/dp/0671631985</AMAZON>
Once they get about half way I start to add in simple Dr Seuss kind of books with rhyming and pictures that make it easy for them to memorise the passage and we go from there.
Most important is to keep at it, don't go more than a couple of days without a lesson, keep it fun, stray from the instructions if it keeps their interest eg. take turns making a simple sentence for each word they learn. Give points and a target for a total for each word they read correctly etc. Slow them down and get them in the space to learn before you start. Sometimes that might mean sitting quietly to read another book first. Maybe just do half a lesson some days etc.
As they say "different strokes for different folks" my daughter started a year later than my son and took doing the book twice to get it so she was 6 when she got it and we had a few tense moments due to both of our frustrations. My son is breezing through it 3-4yrs of age. SJust keep it fun, light and enjoyable. Follow the child!
Personally I take a great deal of satisfaction in having taught my kids to read AND having had such a special expereince with them.