It is well established that emergent literacy is a strong predictor of later reading difficulties, and that the "home literacy environment" plays an important role in the development of children's preschool emergent literacy and oral language. Furthermore, reading difficulties runs in families and children with a family risk of reading difficulties tend to show delays in emergent literacy and might experience a less advantageous home literacy environment. This study examined whether family risk predicts children's second-grade reading difficulties in a multifactorial model including both emergent literacy and environmental protective factors such as home literacy environment and parental level of education. Children were assessed for emergent literacy at the beginning of first grade, and were identified as having reading difficulties at the end of second grade if they performed below the national threshold in at least three of the subtests in reading and spelling. The multifactorial model suggested that children with family risk showed reading difficulties that could not be explained in terms of individual differences in emergent literacy, gender, interest in literacy, years in kindergarten, home literacy environment or parental education level. These findings highlight the advantages of using multifactorial models of reading difficulties that encompass different domains of genetic, cognitive-based and environmental factors. In sum, not only did we find family risk is associated with children's literacy outcomes after 2 years of formal reading instruction, but we also identified possible modifiable factors that may benefit from interventions and lessen the likelihood of developing reading difficulties.