My 5 year old loves our Montessori movable alphabet.
Here she has a pic. of a 3 letter phonetic word such as cat, hat, mop ect... she is placing the letter w/ initial sound above the picture, and the letter w/ the ending sound below.
Right now we are spelling the entire 3 letter phonetic words matched to the pictures. Sometimes she just likes to think up a word instead, and sound it out spelling it phonetically, whether it's the correct spelling or not doesn't matter as long as it's phonetic. Also note that "c" and "k" make the same phonetic sound and at this point are used interchangeably.