Welcome to GEMS Speech and Language!
One of the 5 components identified as important for literacy development is phonological awareness( http://www.nichd.nih.gov/health/topics/national_reading_panel.cfm).  Phonological awareness is a skill that includes the awareness of speech sounds, whether in the form of rhyming, syllabification (how many beats in a word- ex:  caterpillar =4 syllables) or identifying sounds within words by blending (c-a-t =cat) or segmenting cat = c-a-t).  Phonological awareness is NOT phonics.  Phonics involves matching letter sounds with the visual symbol/letter, for example B says /b/.   Early phonological awareness developes long before phonics is taught in school.   Playing with sounds, whether through song, reading, or games is invaluable for early language/literacy development.   

Ways to support phonological awareness:
*Read rhyming books
*Play rhyming games -start with rhyme identification "Do hat and bat rhyme?" and move to rhyme production "What rhymes with hat?"
*Play blending games "I'm going to speak a silly language, let's see if you can guess what word I'm saying..../b/..../a/..../t/."  Start with short words then try longer words if your child is catching on and having fun.