I'm starting a new game with my kids tomorrow (fingers crossed). I've got several ideas, NPC's, a major town, etc.
But, for the overall history of the world, I'm using "Dawn of Worlds." (I think it is still available as a free download.) I had heard references to it, but this will be my first experience actually running it. It is self-described as "A cooperative system for creating fantasy worlds." Essentially what this means for us, is that me and my two kids each play "gods," from the creation of the world, to birth of races, and the rise of nations and clash of empires.
Start with a blank map, and first player draw a 1" map detail. Mountains, river, forest, whatever. Play in a circle for X-amount of rounds. Then it moves on to race creation. One player puts elves in the forest, another decides on dwarves in the mountains, etc.
The interesting parts come in where people step on one anothers toes. The example in the guide was of one player spending multiple turns building a huge forest, while another just gathered points and waited. Then, the second player put elves into the forest before the forest-maker could populate it. Soooo, the forest maker spends some of his points and sends a plague ravaging through the elves.
Cataclysms, wars, mass migrations, these are the things of history. This is the back-story I'm hoping to build with my kids tomorrow. This way, they, the players, will know much of what the characters should know of general world history, plus some basic politics.