Kids and Yorkies can live together but you have to be sure to set major rules for the kids. I have three girls, now ages 4, 6, and 8, and we have never had an issue. My Blazer is about 7 1/2 pounds now, and I am happy that he got that big. A friend and I just rescued a litter mate if my Blazer's who had been totally ruined by the three children he lived with. From the day they got him the kids wouldn't leave him alone and he turned into a growly, snappy, aggressive little thing who clearly was scared of every one and every thing. He went to a home with no children (other than an occasional visiting grandson) and two of his sisters. He is now spoiled rotten and his attitude is almost completely gone!
My recommendation to you, if you get a Yorkie for a family pet, please get a larger, sturdier dog and PLEASE train your children to respect the dog and make sure that your dog has proper training and socialization!