David Fisher, the candle making expert on About.com has some good recipes and ideas on how to make citronella candles. He also includes other suggested essential oils such as clove, cedarwood, lavender, eucalyptus, peppermint, rosemary and lemongrass. Check out his mosquito repelling essential oil blend recipes.
There are also lotions that contain some of these essential oils that you can apply to your skin for double duty because candles will only scare them off for so long. Peppermint, citronella and lavender smell pleasant enough to wear, yet mosquitoes detest the taste and smell of them.
Some also make their own spray with a few drops of essential oil in alcohol. That doesn’t sound too gentle for children’s skin, so I would opt for a lotion. Here’s a gentle recipe from Sunspirit Aromatherapy that’s suggested as an insect repellent, although I don’t know how effective it is as I haven’t tried it yet.
-1 drop Lavender oil
-10ml Jojoba oil
At Nospray.com (a coaltion fighting against the spraying of toxins) cinnamon oil and catnip are touted to be safe alternatives to Deet. Cinnamon oil would certainly smell nice in a candle too.