I have 4 kids that all paddle to some degree. The older ones I started out in the smallest Jackson Fun. For the last ones I switched to a Custom Inflatable Thrill Kitty. http://tseeker.com/thrillkitty/
This is a sit on top catamaran. It is better because there is no spray skirt or chance of trapment when flip. It is also light and they can carry it themselves. It is also way more stable because of the cataraman feature. The other plus is a lot of times they want to just jump out and float along, no problem go ahead. Also if you do any overnight raft trips it is very easy to roll up and put away till you need/want it.
I would say it is good till the kid is about 8-9 depending on size and weight.
I have a used one for sale with an astral otter lifejacket for $350 shipped to your door. My kids have just out grown it, and moved on to kayaks. If you want pictures private message me your email.
Also, when starting out kids, I would highly recommend a zero offset paddle. The offset just confuses them till they get older.