As a relative beginner (who picked exactly the WRONG yarns to learn on) I'd add a couple of things.
Stick to the middle of the color range. Very light or very dark colors are hard to see stitches in. That's obvious with black or very dark brown because the shadows created by the strands get lost in the background. But very light colors "overpower" the shadows too. If you can hold the skein sideways on at arm's length and clearly make out the individual strands, you're probably okay.
Take a piece of a strand and roll it between your fingers. If the plies (the strands that make up the strand) aren't coming unwound, that's a good sign that the yarn will avoid splitting when you're trying to knit it. This was a KILLER for me when I started out (and still gives me trouble sometimes).
2(a). Avoid the "pink puffy heart" yarns that are fuzzy on the outside. Those cute, cuddly soft loose fibers that give it that poofy look get hung on needle tips and cause no end of frustration.
- As someone else already said, get a worsted weight. Anything much bigger or smaller than that is hard to keep under control.
Red Heart has something they call "Super Saver", which is an acrylic that stays together pretty well and as the name implies is pretty cheap. It's available practically everywhere -- craft stores, department stores, any place that has a craft department. The trouble is that it's most commonly sold in HUGE skeins (though you can find smaller ones if you look) so you wind up with a TON of it.
Caron makes a little bit "nicer" bargain yarn, but in my experience most of then tend to be a little more "splitty". Especially if your knitting is on the tight side. And I'd just guess that Lion Brand has a bargain yarn that would be suitable, but I haven't used any of their stuff so I can't confirm or deny.
If you want to get real wool, Jojoland Baritone makes a pretty good choice. It stands up to the clumsy ones like me pretty well, and it's pretty manageable. Plus it comes in 50 yard balls that cost about $2, so you can get the whole basic Crayola box for under $20. The disadvantage to it is that it's harder to find. And the balls are small enough that you don't wind up with 800 yards of something you'd never use again. But it's wool, with all that entails. Most importantly it's hand-wash only, which may not matter if you're only making practice swatches and might be cool if they want to try out felting (on purpose, I mean). You might have to order it online though, I don't remember ever seeing it in stores. I THINK yarns.com carries it, and they deliver pretty fast. If you're looking for something for Christmas, you MIGHT still get it in time -- if you order today.
And you didn't ask about them, but since I'm running off at the fingers anyway I'll throw it in (at no extra charge!). I'd suggest that whatever needle size is shown on the color band on the ball/skein, you go up 2 sizes from that if they're first-timers. the stitches will be bigger than they're supposed to be, but it'll be a lot easier to make the yarn behave. At least, that's what I found.
Good luck to 'em!