I suppose same location would make sense then you will get more of a sense of change in your subject rather than the background. Something as simple as sleeping in a cot. Then you have a reference object (the cot) against any growing up and you may find similar poses between shots.
There is not really a hard and fast rule and maybe you want to try a couple of different ideas, static location and camera settings as well as all things changing.
Maybe have a search for time lapse photography on the web and see which ideas you like (the subjects do not have to be children) and adapt them to suit you.
The software you use to create your time lapse will depend on the hardware/software platform you are using. On the Apple platform you will be able to use tools such as iPhoto and iMovie to achieve what you require. On a Windows based machine you will also have software that came with the machine that can stitch still together stills to make a movie.
Good luck and have FUN
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