“And the Word was made flesh, and dwelt among us, (and we beheld his glory, the glory as of the only begotten of the Father,) full of grace and truth.”
John 1:14

The grace of God teaches us to live sanctified lives:
“For the grace of God that bringeth salvation hath appeared to all men, Teaching us that, denying ungodliness and worldly lusts, we should live soberly, righteously, and godly, in this present world;” Titus 2:11-12
Not by out own works, we were saved and delivered from the corruption that is in the world through lusts and the condemnation of the unrighteous.
Now that we have been delivered, we are expected to walk as saints, and in that walk, he tells what our conduct should entail:
“Be ye therefore followers of God, as dear children; And walk in love, as Christ also hath loved us, and hath given himself for us an offering and a sacrifice to God for a sweetsmelling savour. But fornication, and all uncleanness, or covetousness, let it not be once named among you, as becometh saints;” Ephesians 5:1-3
Always remember, when he told us to imitate God as dear children, he showed us how- walking in love and living the sanctified life, and that is the grace of God- the loving kindness of God towards the most undeserving that enables that underserving individual to live a sanctified life. Simply, in our imitating God, he wanted us to live in and manifest the grace of God.