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I have setup a PSN account for myself and sub accounts for my children.

When they atempt to play a game they are asked to sign into their PSN account but the following screens are asking them to create an account. So we did that and the family now have 4 accounts on 4 different email addresses. Did we need to do that? I can still access parental controls from my account.

Can we get by somehow with just one account plus sub accounts and each person still save their gameplay seperately?

If I now get a Playstation Plus Subscription will all 4 users be able to play the 2 included games each month and save their gameplay seperately.

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Unfortunately, in order to use the PlayStation Network each account needs to use a unique email address. What you've done is correct for your setup. For PlayStation Plus, you should only purchase it for the main (master) account you set-up.

If you set up the console as your Primary device, the subscription can then be shared with the other accounts on the system, without the need to purchase separate subscriptions. This video shows how your account can be set as primary:

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