How do you know if child can really read or just sight reads and guesses some based on phonetics?
I don't think it matters at age 2-3 if they are "actually reading" or not. I believe what matters most, is that you build their interest and confidence about reading.
For example, Anytime my 3yo picks up a book and "reads" it. I praise him for reading whether he actually reading, memorizing, or just making up the story by looking at the pictures. "Wow what a great job you did reading that story!" We also play games, while reading. As long as it is fun and positive you are on the right path.
On a different; I also believe the ability to "guess" a word can also be sign of intelligence.
Just my 2 cents for what they are worth.
