Backstory: 

I bought a new Xbox One and successfully setup my account. I then wanted to begin adding my three children as "child accounts" as I am a parent that likes to ensure there is some limitations to what my children have access to.

9:30am - I logged into Xbox One and began the setup process for a new account. I got to the point where it asks for a $0.50 charge to approve the child account, then the system stated it ran into an error and returned to my homescreen. I thought I had lost all progress (~10mins). I went back to account entry and the child account was showing, so I continued and attempted to login to the account based on the un/pw we had seleted. Error on screen with no error code.

10:00am - After spending time on my own trying to go through various Xbox One paths to log in and finalize setup of new child account, I gave up Googling for the solution and opened a chat box with MS support. 

12:30pm - MS support was just as lost as I was and had no options. They had me look at numerous Xbox One settings and website settings, remove/add child account from my account and all ended with no change.

I still could not access any xbox profile for the child account on the website or login to the Xbox One console with the child account.

1:00pm - Finally, MS support had me create an entirely new account via the website, not the console. This worked. They also had me update the child account with a fake email address so I could create a brand new child account with the original email address. 

Correct Steps to Setup an Xbox One Child Account:

1) Create your (adult) Microsoft account via  http://www.account.live.com
2) Once that is created, open the "Your Info" tab in your new Microsoft account. Click on the "Go to your Xbox profile" link.
3) Under your profile name on the upper-right, select "Profile" to finilize your Xbox Profile creation.

Now you should have the basics of your own MS and Xbox profile created. (you can make any further settings changes from the Xbox One console)

4) Create an email address for your child. They MUST have an email address to setup a Microsoft / Xbox account.
5) Create your child's Microsoft account via http://www.account.live.com
-  While creating this account you will need to login via your adult MS account to approve the child account.
6) Once the child account is created, open the "Your Info" tab in the new Microsoft account. Click on the "Go to your Xbox profile" link.
7) Under the child profile name on the upper-right, select "Profile" to finilize the Xbox Profile creation.
- You will once again need to login via your adult account to approve the child account. This will also setup default privacy permissions based on the age of the child.

Now you have a valid child account associated to your adult account.

8) Turn on your Xbox One.
9) Login to the Xbox One with your adult account.
10) Now use the "Add User" option to add the child account you just created.
11) Complete the approval screens to finish the initial setup of this account.
12) Once you are on the Home screen of the child account, log the child out of the Xbox One.
13) Go into the settings for your adult account. You should now see a "Family" section listing that child account.
14) Select the child account and manually select the privacy options you want for your child. Save and logout.

You now have a fully setup parent and child account. You can repeat steps 4~6 for any number of child accounts before you repeat steps 8~14 to finish primary setup. 

This is a ridiculously complex system that should be streamlined via the console itself. But that process fails (did for me and others via google searches). Others just skip the process and lie about the child's age to make it a full adult account thereby giving up on all parental controls.

Well I hope this helps someone else as I've wasted 5 hours attempting to setup 3 child accounts. A process that should have been done in less than 30mins.