I usually finish children's toys with shellac only. It is totally food safe and I like to keep the wood grain instead of painting.
I have heard of people using food coloring to stain things but, it sometimes will rub off and stain other things (like kids mouths) if you don't coat it with something.
Some also say that once cured, anything (stain, paint etc.) sold in the US is safe for children. It is illegal to make or import paint with lead in it. (Which seems to be the big issue.)
Just my .02 cents worth.
Rog