If your children are fans of "The Lord of the Rings" or "The Hobbit," they are probably familiar with and fascinated by the underground homes where the hobbits live. A hobbit house is a dug into the side of a hill and would make a great club house for a kid. It has the benefit of being much safer than a tree house, and if you build it using the right procedure, it will last for years.
Sketch a rough plan on paper of the layout of the hobbit house and note the dimensions. Since this house is for kids, you won't need to make it very large. The height of the entrance should be no more than 5 1/2 feet high and the interior doesn't need to be any wider than 10 feet across. Consider the location and make sure there are no underground utility lines.
Dig into the side of a hill with a back hoe to the dimensions you want. You can use a shovel or get some friends with shovels to help you dig if you don't have access to a back hoe. Start digging at the at the "roof" and hollow out the side of the hill. Keep the dirt off to the side (you'll need it later) and dig out a hole for the entrance and a window round or half-round window. Keep the wall about 1 foot thick to ensure that it is stable.
Line the inside walls from top to bottom with metal mesh panels. Mix up some plaster by following the directions on the bag and apply a thin starting layer with a wide putty knife. Apply another thick layer with a trowel and sand it smooth with fine sandpaper after it dries. Apply one more thin layer and smooth it down. Paint the walls with a neutral, earthy colour to reflect the hobbit style and to protect the plaster.
Place wooden pallets on the floor and line the inside of the pallets with straw. Measure each area and cut pieces of treated lumber to fit into place. Hammer them to the pallets underneath and finish by sanding the floor.
Cut some tree limbs with a chainsaw that are about 3 inches thick. Carve out a large notch in the centre point on the top of the inside wall to anchor the ends of the limbs. Lay the tree limbs from this centre point across to the top of the outside wall, like spokes on a wheel. Cover the end of the limbs in the notch you carved out with mud and pack it down. This is the frame of the roof.
Cut a tarp with a pair of scissors so that it fits over the roof without any corners hanging down. Lay thin planks of treated lumber crossing the frame of the roof and cover the roof with the dirt that you had left over from digging the hole. Lay down grass seed on the roof to help it blend in with the rest of the hill.