You would only report the income, not the value of the account. So, yes, the interest is income.
If your children qualify as dependents, you can't just decide not to claim them.
Both amounts are small. A dependent has a special standard deduction. Since both amounts are small, they are not required to file.
Dependents – If you can be claimed as a dependent by another taxpayer, your standard deduction for 2021 is limited to the greater of: (1) $1,100, or (2) your earned income plus $350 (but the total can't be more than the basic standard deduction for your filing status).
