I know this looks like a duplicate, but I don't believe it is.
I am an adult. My child is young, and now has a Nokia Lumia 635. I am attempting to set up an account for her.
I do not have a Windows Phone. I set up an account using a gmail address. It appears to work correctly.
I created a new email address and account for my daughter via Microsoft's websites, i.e., an Outlook address.
I have completed all name, age, location, email, and so forth forms for both of us. I have set up My Family. I have set up accounts and gamertags on XBox Live.
When I log into My Family from my desktop, with my own account, I see my daughter's account as a child account. It is marked "Free and paid downloads turned on" (I will later change this, but thought it simplest for the moment). When I log into My Family from my desktop using her account, I can see my name and email but cannot access any other data.
When I log into XBox Games on the phone, it shows her gamertag and profile accurately. When I log into XBox Games from the desktop, I get the same result as with My Family: with my account, I can access and edit both accounts, while with hers I can only see hers and can't change anything.
When I attempt to download any app, be it XBox or otherwise, I get the dreaded "My Family setup needed" (please get a parent to log in to the account from a computer and give permission).
I have tried shutting down the phone for 10 minutes, while my computer is completely logged out of everything, and it hasn't changed anything. I have also run a complete backup of the phone, successfully.
In short, everything works as it is supposed to... except that my daughter's phone won't download apps.