S.L.
As a demonstrator with Stampin' Up!, I get this question a lot!! I have found, both personally and from my customers, that it's easiest to start with the most current photos, and work your way back. So if you have had a recent birthday for one of your children, take some of the photos and make a page or two. You don't have to scrap ALL of your photos - you just want to create the essence of the day or event. If you feel stressed by a 12 x 12 book, start with a smaller 6 x 6 book.
It really is up to you if you want to do a book for each child, or do a family book. Or, you can do both - Do a page or two for each year of your children and do a family book or books. Try not to stress out about which direction to go - this is a fun hobby! Once you start, you will get figure out what will work best for you. Get together with a friend or two and scrapbook together!
Good luck and have fun!