The simplest definition of self-esteem is the way you feel about yourself. When children feel confident about themselves, it affects their lives in every aspect, how they learn, how they interact with others, their sense of independence.
A large part of our grade one program is helping children to develop a healthy self-esteem. We work on this every day of the year - it is part of our daily routine. Praising children for the effort they put into their work. Praising them for their accomplishments. Teaching the children that we all learn differently and that we are all at different levels of learning and that's ok... there is nothing wrong with that. We learn to encourage each other and praise each other when we've tried our best.
It is also important for the kids to learn that no one is perfect and that we all have things that we are working on. Kids that are reading at a high level, are working on reading harder books and working on fluency, whereas other children are still learning sight words or their alphabet sounds and as long as all these kids are "putting their best effort" into what they are doing - then they should all be proud of themselves.
The following link is a great write-up about self-esteem in children.