Well, like the stories many on here are relating this was a "while" ago...
My parent's place is in a pretty sheltered area, they started me off at age 6 with a 10 foot plywood rowboat with oars and about 100 feet of rope tied to a tree. (Always with a life jacket as well.) The theory on the rope was if I dropped the oars they could pull me in. I got the hang of rowing pretty quickly and the rope went away. After that it was "stay where I can see you" for a while. My Mom made sure both myself and my sister had swimming lessons at the "Y" early on too.
At some point my Dad came up with a 2 1/2 HP Johnson from the late 1940's/early 50's era and got it running. It wasn't fast but I learned a lot about starting and running small engines from it. Pretty sure it's still around somewhere and would probably run even now.
From around age 10 or so, I'd drive the "big" boat a little bit here and there while my Dad supervised. It got to the point that I'd end up driving down to Wolfeboro if we took a family trip.
Fast forward a few years, my Dad bought an older 14 foot runabout (I think it was a Chrysler) that had a nearly new 50 HP Mercury on it (mid 70's). I think I must have been around 13. I helped fix it up and my job was to maintain it / paint the bottom, etc. every year and keep it clean. In return, I got to use it and the gas tanks were always magically refilled. We had a lot of fun and I learned a lot about boat handling, reading the weather, etc. Never got grounded either, somewhat shockingly! I was always popular with my summer island buddies for some reason... I think it would do about 35 if they sat in the back on the floor. Didn't know how good we had it!
One recommendation if it's possible is to try to teach the kids to sail. In my opinion it really helps with overall awareness of the weather, your surroundings and it builds a lot of seamanship skills by pure necessity. Scared myself stupid more than once on a sunfish when I was a kid but learned a lot in the process. Good luck!