Hey Rattles,
Johncross has the right idea. I specialize in teaching young children and always start them playing on just one string--either a bass line or riff on the 6th string (Smoke on the Water is a good one), or a simple melody on the first string. Bass lines are nice because they can start singing while playing.
I also use a string mute--a little velcro sandwich I invented--that mutes the 3 bass strings, enabling one-finger G, G7, and C chords.
Here's an article I wrote about teaching little kids.
And I just published a guitar teaching handbook that has tons of info about teaching young kids.
Hope this helps,
Rob
**Edited to remove links to a profit making site and book sales**