My two year old has a phlegm cough and has nasal congestion what's the best thing i should do?

Productive cough: Most likely allergies, considering nasal stuffiness too! however without through exam, can't be certain. See your pediatrician. Approach should be anti allergy meds +/- antibiotics.

All stuffed up!: First, I am a huge believer in usuing nasal saline drops (salt water). Try putting a drop in your child's nose every 3 hours. You can also put a litlle neosporing at the opening of each nare. Have your child drink as much fluids as possible and dilute the milk with water as necessary. If your child's symptoms worsen or fever develops, you should visit with your pediatrician.