Unable to set up child account/iCloud on iPhone

You need to setup the child’s account from YOUR device as described here:

Create an Apple Account for your child - Apple Support

THEN, you can setup the child’s device with the credentials you created using your device.

Then, once your child’s account is established, you need to apply the appropriate Parental Controls as described here:

Use parental controls to manage your child's iPhone or iPad - Apple Support

I’d strongly recommend that you restrict your child’s ability to alter his/her Passcode, FaceID, or Apple Account particulars using these controls.