This certainly nothing fancy( or to stake your life on), but it could entertain /motivate the kids on a winter afternoon. http://www.primitiveways.com/two_bladed_pocket_knife.html
You show your child how to make that and they make it, I'll bet ya got a good chance of it becoming an heirloom. I can hear it now, 'My pa taught me how to make this when I was a boy about your age. Now, I'm gonna teach you.' I think I'll make one just to have as a 'I did it' thing. Haha.
Looks like a cool little project for the fun of it but Ihave tried to figure out how to make one that would work more like a regular pocket knife in that it would stay open/closed better. That one appears that it would just flop open and closed.