If you go to the families screen you should see the 'New Generation' button at the top. If you click on that, you should get the message mentioned by MissKathy. If you click OK, the game should start agin with you being presented with a choice of the previous generation's kids to pick. If you clicked 'Cancel' or similar earler you would get a situation like the one you describe.

If you can't see the 'New Generation' button and you definitely have version 1.00.09, there's something wrong!