Wouldn't you just have a family account at that point? And in that case you can lend them the virtual game card
You can only lend 1 game at a time that way so if someone wants 2 games you're stuck. Maybe one of your children wants to play both Pokemon and Picross on their Switch Lite
I'm not saying it's the end of the world, just odd restrictions.
I'm pretty sure Nintendo's attitude is basically "If you want that much flexibility in lending and swapping, you should have bought the physical copy in the first place". Which, yes, is a problem with 3rd parties refusing to release physical copies, but Nintendo designs first and foremost around Nintendo's plans and practices.
@Lazz Yeah, that workaround works well for 2 switches (as long as they are Internet connected) but doesn't work at all for 3. So if 2 kids each had a Switch you couldn't do that.
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