Letter magnets are great. There are so many things you can do with them. Have your child point to specific letters in a group, name letter sounds, build words etc.
For some reason, playing with magnets on mom's refrigerator or on a white board is a fun, exciting thing.
An idea for helping your preschooler learn to read is to write words on index cards and attach a magnet to the back. Start with site words and easy three letter words that the child can sound out. Ask the child to find a certain word. Make silly sentences out of the words and have your child read the sentence they made. My daughter loves to do this. It gets her laughing so hard. "The mom pan ran to the pig" etc. She's having fun and learning to read and compose sentences at the same time.
Here's another silly sentences game that you can purchase that my daughter also loves to play.