I know that as long as your children are with you t hey don't need to have a license to fish or shoot birds.
However, does anyone know the law when it comes to kids (in my case 7,9) hunting deer? Do they need a hunting license or can they harvest a buck as long as they are with me?

Yes. Yes they need a license. Anyone who hunts regardless of age HAS to have a license.

They must Always have a liscense. If they intend to kill something, they HAVE TO HAVE A LISCENSE. that being said, they do not have to take a hunters safety course until they are seventeen If they are in the same blind as you/with you. If they wish to hunt alone, they need a to take and pass their hunters safety course.

They must hint with you until they are a least twelve. At that point they have the option of taking the hunters safety course and hunting alone.

Hope that helps.

FAQ from TP&W's website:

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What type of hunting license is required of resident and non-resident youth (16 years of age and younger)?
Resident and non-resident youth may purchase the Youth Hunting License for $7. Youth are exempt from state stamp endorsement requirements. Federal Duck Stamp is required at age 16.

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Kids of any age that are hunting are required to have a hunting license. Including birds. Youth license is 7 bucks.

Get your kids lifetime combination license before they go up again. Well worth the cost.