iPad child account created new Macbook Air account and is asking for an unknown password

I performed the following steps:

1. Created a child Apple ID account and added it to our Family Sharing
2. Fully reset an old iPad 8th gen iOS 16.4.1
3. Signed into the iPad using the child account

This process created a contact card and ID using my wife's account, even though I am the family organizer. It then created an account on her Macbook Air with an unknown password and is requesting that password under the iPad Settings to "Update Apple ID Settings." Attempting to select "Don't know this device password" leads to a "Reset Encrypted Data" loop that I cannot get past. How do I resolve this? Even on the Macbook Air we are unable to sign into this newly created account.