This study investigated the prospective relationships between reading performance and reading habits among Finnish children during the first and second grades of primary school. One hundred and ninety-five children were examined twice during their first primary school year and once during the spring term of Grade 2. The results showed, first, that children's reading skills predicted their reading habits: the more competent in reading children were at the end of Grade 1, the more likely they were to engage in out-of-school reading one year later. Second, reading habits also predicted reading skills: the amount of out-of-school reading at the end of Grade 1 contributed to the development of word recognition skills.