A large proportion of the UK adult population has very poor literacy and/or numeracy skills (see the 1999 Moser Report, the 2003 "Skills for Life" Survey and the 2006 Leitch report). In 1999, the Moser report found that approximately 20% of adults in England had severe literacy difficulties, whilst around 40% had some numeracy problems. Having a population with a large proportion of people with poor literacy and numeracy is harmful both to the low-skilled individuals themselves (who face a higher probability of being unemployed, having an unstable job and lower wages) and to firms (that increasingly need a better skilled workforce). The evidence to support the economic value of basic skills is now extensive (see section 2). There are however, potential indirect benefits from basic skills, which have been less frequently addressed in the literature. This paper addresses the important question of how parents' basic skills relate to the early cognitive development of their children (at age 3-6). This question is important as early cognitive ability is a key determinant of subsequent schooling, wages, and other socio-economic outcomes (Heckman, 1995; Murnane "et al.", 1995; Feinstein and Duckworth, 2006). Further, there are significant cognitive achievement gaps between children from various socioeconomic groups: these gaps emerge early i.e. before starting school (Cunha and Heckman, 2007) and increase as children age (Carneiro and Heckman, 2004; Feinstein, 2003). Understanding the inter-generational transmission of skills is therefore important from both a distributional and an efficiency perspective, and indeed a number of recent papers have investigated the contribution of parents to the early formation of their children's cognitive skill (Todd and Wolpin, 2007, Cunha and Heckman, 2007). The novelty of this paper is that the authors distinguish the separate contribution of parents' literacy and numeracy skills in adulthood (at age 34) on their children's cognitive test scores, as distinct from the role of other factors including parental ability, education and socio-economic status. The authors use the British Cohort Study (BCS) data set, in which rich information on parents is combined with early test scores for their children. The authors use numeracy and literacy tests of parents at age 34 and relate them to cognitive tests of their children taken pre-school at ages 3 to 6. They are able to control for a vast array of family and individual characteristics, including parents' early years (parents have been surveyed 7 times since their birth in 1970) and socio-economic background. The authors find that parents' basic skills in literacy and numeracy at age 34 have a positive significant effect on their children's test scores, over and above the positive effects of parental education and ability. Appended are: (1) Variable Description; (2) OLS estimates using the same sample size for all the regressions; (3) Strength and Difficulties Scale; and (4) SURE regressions of cognitive and non cognitive outcomes for school age children. (Contains 8 tables and 17 footnotes.)