How do I set up my 12 year olds iPhone 4S using her iCloud family account?

I just got a new iPhone 5 and transferred my old number contacts etc.

They wiped my 4S and set it up with a new number. I created my 12 year old a new iCloud account under the family setting.

When I enter that into the phone under Sign in with your Apple ID when setting up the phone it says: Can't Create Apple ID.

But if I go into my Apple ID and iCloud. Both my 10 and 12 year old are getting iPads for Christmas so this will be a problem again if we can't get them signed in under their iCloud accounts.