This was not my idea, and in fact I think I got it from Mary's previous blog a few years ago, but since you can't see it there, I am going to share my version here. This is a simple idea that offers a variety of sound related possibilities. I purchased mini tote bags from Hobby Lobby (on sale of course :). I got red ones for vowels, yellow for the letter "y", green ones for "c", "g" and "s" since they are the consonants with more than one sound, and the rest of the consonants are in the natural color (that color was the cheapest). I also got blue bags for some of the multi-letter phonograms such as "ch" and "sh" (not pictured).
On one side of each bag I wrote the lowercase letter, and then on the other side the uppercase letter using a permanent marker. Inside each bag is a set of texture cards for that letter, and a selection of wooden die-cuts that begin with the corresponding letter. These can be purchased for anywhere from 25-50 cents at craft and hobby stores. You could also just collect small toys or objects you already own. I slowly accumulated the little figures over a period of a few months until I had 2-6 per bag (some letters are harder than others :)