With a solid vocabulary, a child understands and uses spoken and written words to communicate effectively. A broad vocabulary helps a child in all subject areas. The more words a child has been exposed to, the easier it is for him to figure them out when he sees them for the first time in print, and the easier it is for him to understand new concepts in class.
Choose 1-2 words from the book you are reading that may be interesting or unfamiliar to your child. Discuss the meaning of the word in the context in which it was used. Talk about variations of that word (e.g. direct, directions,director, redirect, misdirect) and how the meaning changes.
Continue to read aloud to your child even after he is able to read independently. Choose books above your child's level because they are likely to contain broader vocabulary. This way, you are actually teaching him new words and how they are used in context.
Choose a word, your child has to think of another word that means the same thing (a synonym). Continue taking turns until someone is stumped (cold, freezing, chilly, etc). Variations: antonyms (big, small, giant, etc.), prefixes (preview, pretest, prepay, etc.), suffixes (careless, useless, helpless, etc.), categories (food, pets, movies, capitals, etc.).