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BayleeBoo,
I can relate to the children. I grew up overseas and was not exposed to dogs at all. The only one I ever saw there bit my leg and I have a scar from it. The kids may not be exposed to dogs or have had a bad experience witha certain dog. Talk to them or have your mother talk to them and see why they are terrified of your lab. Perhaps you can teach them not to be afraid of dogs and I am sure that your lab will become a great friend to them.
The only way I got over my fear of dogs was having a dog of my own. Now I look at the past and say to myself: Why was I so scared?!