We like to talk about folklore past down from generation to generation. But we also love to just cultivate a magical environment and spirit by reading child appropriate fairytales and stories.
Here is a list of our favorite family friendly books.
All Ages
I currently am a mother to a 3 year old and a 6 year. Although I see the importance in sharing stories such as Jenny Greenteeth and the Kelpies, I don't want to freak them out too much.
Since they're just little we're starting off with some easy on the imagination books.
The Rainbow Magic series by Daisy Meadow is wonderful to read aloud while your littles play with playdough, are in the sand box, or on the swings. There are so many of these books and all have components of the natural elements. They really spark an intrigue to find the magic all around us. 
The Pixie Hollow series is another series that I love to read aloud and it cultivates a love for fairies and nature. Plus it's fun because most kids know Tinkerbell and having a familiar face to explore with helps keep the story engaging.
Cicely Mary Barker inspired me at a very young age. Her books are beautiful and she creates a world a whimsy that I immediately wanted to fall into. Which leads me to my next book...
Fairyopolis is a magical little field journal full of interactive maps and letters. It has flower fairy lore and imagery by Cicely Mary Barker and it allows the reader to further fall into the beautiful world she's created for us all. But it also reminds you that her world IS our world. This book was the basis for a lot of my own explorations as a child.
7+
This book is probably for our non-toddler readers who can handle a bit of spook every now and then. Of course this is up to parental discretion and depends purely on how your child reacts to spooky stories. I have one child who loves a bit of a scare and one child who does not. It just depends.
Brian Froud's Faeries is an absolute must have in my opinion. It's magical and full of historical lore. The illustrations by Froud and Lee are captivating, beautiful, and sometimes a little spooky. This book is another one that I hold close to my heart and is a big inspirer for many many inquires, explorations, imaginings, and more!
13+
John T Kruse has some wonderful books about the world of faery, Faery and Beyond Faery. I highly suggest them for our older readers. I do think they could be read by parents and then told to our children the good old fashioned way, around the dinner table, around the campfire, and at bedtime.
Another book that needs some serious decoding every now and then, but that can be told orally like our ancestors used to do, is the BIG book of Irish Fairy and Folk Tales.
There are many important stories in here but it is not an easy read.
If you have any suggestions that you loved as a child or love to read your child, leave a comment and let me know!
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Thank you!!