Shelby, Jason gave you some good advice. I’m going to provide some that is somewhat contradictory to his, and you will have to find what works with your pup. You have a big advantage with such a young dog. As Robert keeps saying, every dog is different, and what works for one may not work for another.
Lance, my 4yo rescue GSD mix, is also terrified of children. When we got him last year if he so much as heard a child no matter how far away, he would tuck tail and run into the house. Unlike your pup, we have strong reason to believe that he did have negative associations with small children in a prior unsuccessful adoption. Like Jason, I ALWAYS have Lance on a leash around children, but primarily because I want to be absolutely certain that there is no chance of a child being bitten due to fear aggression. Where my actions diverge a bit from what Jason says is that I DO allow Lance to get as far away from the child as he needs to in order to feel safe. I’m not going to go into all the tiny steps I have taken with Lance on this issue over the past year, but he can now go past children on the trails without a problem. We can even walk past a playground with a few kids and he doesn’t like it, but also doesn’t go into flight mode. He has befriended a 14yo neighbor girl, and is actually starting to show a bit of interest in her 5yo brother. He still keeps his distance from him and his 3yo sister, but is no longer terrified of them. All the steps I have taken have 2 elements in common: 1) I don’t force him to be near children, although I do expose him to them in different ways. He has learned that he can trust me not to put him in a situation he can’t handle. 2) He consistently sees that as far as I am concerned, children are no big deal. With the neighbors, he frequently sees me talking and laughing with them. I use a 30-foot leash so he can keep as far away as he wants, but I stop and chat with them a bit. This gives him confidence and also lets him control how close he will come to them. Yesterday, for the first time, he came within about 5 feet of the neighbor boy, and was more “interested but cautious” rather than afraid. I have no doubt that it won’t be too much longer before they are friends.
I apologize for the length of this post, but I want you to have hope that it can be overcome. Your situation might also be a bit different. It is possible that at around 4-mo, your pup is going through a fear stage. I wouldn’t make a big deal of it (although taking precautions and not allowing it to become a big deal to the pup or to allow an unfortunate incident with your grandchildren). You might find that in a few weeks or so, the issue just naturally goes away. If it does not, I’ll be happy to provide more detail of the steps I have taken with Lance. Good luck!