I think a lot of us had fridge alphabet magnets – or bought them for our kids! – and, later, word magnets. We certainly did. Polymer clay is certainly a good medium for making your own custom ones. Help your struggling-with-their-sight-words kid by making short word magnets. Menucha, from MomsAndCrafters, has a full tutorial and a video on it. As she mentioned, be cautious with the strong magnets. And, if you can, use the stronger clays like Kato or Premo rather than the Sculpey 3. These will be used and dropped on the floor most likely so strong clays and a full, complete curing are important. This will make them the sturdiest possible.
When I make items with magnets, I indent the reverse side where the magnet will go so that I know where to glue the magnet afterwards. This way it won’t protrude as much either. You should avoid baking craft magnets as heat lowers their effectiveness. And, if you’d prefer not to sculpt all the letters… there are full alphabet cutter sets out there. They’re great.