Our two children (15 & 14) each have shares which they purchased with their own money saved from birthdays and xmas over the past many years.
They each bought 100 x BHP at $17.00 ea back in June 2005 and even with the price correction over the last weeks they still have made a nice on 'paper' profit and intend to hold them (on my advice) for many years to come.
I can offer a bit of info re tax implications on children holding shares and the franking credits, although you must check out the ATO website re childrens share investments.
http://ato.gov.au/individuals/content.asp?doc=/content/11884.htm&page=1&H1
It's a great read and it should answer all your questions/concerns as it offers info regarding who's TFN should be quoted against the shares, dividends and re lodging childrens tax returns via the various links / table of contents on the right hand side of the linked page.
Also, even though their income from dividends should be under the tax free threshold for children and therefore no need to lodge a tax return, they can still lodge an application for a refund of Franking Credits for that financial year so they receive the franking credit as a full refund - there's more info (explained alot better) within the ATO link above which is specifically about childrens share investments and applying for a refund of Franking Credits.
Two other ATO publications which may be helpful in understanding the capital gains implications when shares are sold are:
Personal investors guide to capital gains tax NAT4152-6.2007
You and your Shares 2007 NAT2632-6.2007
I ordered both of the above publications free through the ATO website > booklets and publications > online ordering.
Our kids really enjoy owning the shares - they feel like enterprenurs as none of their friends have savings let alone own shares. It also gets them interested in the evening news as they wait for the finance update (just before the weather on Channel 9) to see how the BHP shares have fared for the day - (BHP for most of the time is mentioned).
They don't participate in the dividend reinvestment scheme but when the dividends are deposited into my bank acccount (as I'm the trustee for them) I immediately transfer the dividend into the kids bank account with a deposit reference of BHP dividend.
Otherwise if I hold the dividend in my bank account for my personal use - the shares are then deemed by the ATO to my mine and not the kids. (not good for tax reasons when the shares are sold due to my income.)
Note : The dividend is paid into the Trustees bank account and cannot go into the kids account directly - that's just the way all the brokering accounts have to be set up and I checked out all the online brokering accounts to see if that was possible - but it's not.
So be sure to immediately transfer any dividends received straight into their personal bank account.
I'm raving on here, but another very informative share investment site (which deals alot with resource stocks) is:
http://www.eurekareport.com.au
they offer alot of free information or you can sign up for a 7 day free trial.
Good luck with it all.