I had exactly the same boat as a kid (Its was the ZED 31 then ).
Mainly used by myself (11) and 8 year old brother, 1st engine was a 4hp 2 stroke Yamaha. It would happily plane with 2 of us onboard. It was used on tiller steer for a year or so till Grandad built a incredible forward steering/throttle position using bits he found in the garage and old beer line as accelerator cable.
By age 13 I needed more power (we were bigger and heavier) and managed to buy a Yam 8hp to go on it, great performance and would happily plane with both of us on board again.
My advice, find a lightweight 2 cylinder 2 stroke, Yamaha 8hp or - the holy grail- Tohatsu 9.8. The boat takes a short shaft. If you go too small the kids will soon get bored of it. Since its already got the console and the weight is further forward I would also look out for a 10hp Mariner/Mercury or Yamaha 9.9, both 2 strokes. At this size, and driven flat out, a 4 stroke wont be much quieter or use much less fuel, but it will be heavier, more difficult to transport and probably less reliable if abused.
You responsibly have concerns over safety, but try and put some trust in your kids you will be amazed how much boat craft they have picked up from you. Make sure they are aware of your rules or even better get them to do a powerboat qualification.
For comparison with my sons boat history:
Age 6 - Suzumar 2.3 & oars (At 1st still tied to my boat with floating ski rope)
Age 8 - Suzumar 2.3 & 2hp
Age 10 - HonWave T24ie & 5hp (1st Planing boat)
Age 12 - Quicksilver 270 & 8hp
Age 13 - HonWave T40ae & 20hp
I think its time to upgrade this year to the Ultimate Sib for me, I mean him
I have a Yamaha 25hp in the garage, just need a Bombard 380 to go with it