This digest discusses some of the ways children develop functional phonics knowledge in the context of authentic reading and writing, as well as some of the ways teachers can foster such development. The digest suggests that children develop phonics knowledge by: having familiar stories or poems read to them repeatedly; discussing letter/sound relationships in the context of authentic reading selections; reading favorite stories, songs, and poems independently or with a peer; and developing their own strategies for learning letter/sound patterns. The digest discusses ways teachers can help children develop phonics knowledge: (1) have faith in children as learners; (2) discuss interesting patterns of onsets and rimes in the context of shared reading experiences; (3) emphasize the use of letter/sound cues along with prior knowledge and context; (4) foster the acquisition of phonics knowledge indirectly, through various means; (5) be alert for children's idiosyncratic ways of developing phonics knowledge; and (6) provide additional materials and help for individual children. (RS)