pinterest win: big ol' magnet board
... and Command strip it to the wall, but whatever. I mean, I actually had to go into Walmart, which is pretty much the worst. But I did find the super-cute letter magnets there (for 97 cents) so that was a bonus.
Most of the boards I've seen on Pinterest were hung vertically, but with Holdy being so little (and having a tendency to pull on stuff), we decided to mount it horizontally. We put it in front of the fireplace because, well, it was the only adequate amount of "wall space" we had, and we never use the fireplace anyway because the glass gets too hot for baby hands.
Holden's clearly not spelling yet, but she does have fun moving the magnets around (and, let's be honest, throwing them, putting them in her mouth, etc.)