I'm kind of busy right now so I'll just suggest basics. 🙂 I also use an older version of the operating system so what i suggest might now identically match what you;d see.
Apple > System Preferences > Accounts you may need to unlock your administrator account. Now + to add a new user account. Do not make it an adminstrator. Give it a name a child likes but is simple, because you cannot easily change it later. You can also set up Parental controls from this window.
Learn some basics on how iTunes works with files and that "library" actually means a specific file that points to media files that can be shared, or not.
What are the iTunes library files? - http://support.apple.com/kb/HT1660
More on iTunes library files and what they do - http://en.wikipedia.org/wiki/ITunes#Media_management
What are all those iTunes files? - http://www.macworld.com/article/139974/2009/04/itunes_files.html
Note the two things below are not identical:
iTunes: How to share music between different accounts on a single computer - http://support.apple.com/kb/HT1203 - relocating iTunes' media folder to a shared area but leaving separate library files - extra tip at https://discussions.apple.com/thread/3664756?answerId=17331189022#17331189022
Chris CA's instructions on sharing one iTunes music library between multiple user accounts - https://discussions.apple.com/thread/1901348?answerId=8974074022#8974074022 - Multiple users using a single library file - similar post at: https://discussions.apple.com/thread/3753008
If you have enough room on the computer it would be ideal for each person to have their completely independent collection. That way if somebody doesn't like a file they delete just their own copy, not everybody's shared copy. The big problem with having multiple users, especially children, sharing one account is it can quickly result in chaos and lost files.