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Will be honest and say I’m less sure how good it would be for young kids - depends how young tbf (mine are 8 and 5 and I think the 5 year old would be bored) and how outdoorsy they are. It’s a beautiful country with a lot of nature to see and things do outdoors (volcanos, waterfalls, black sand beach, natural thermal spas, geysers, glacier). More easily / best experienced by foot so you’ll want to be sure the kids are up to that.

Reykjavik has a lot of good restaurants and bars but is small and you only really need a full day in the city itself. Personally, if going for three/four days, I’d plan to spend one in the city and the rest seeing the nature. There’s no shortage of Golden Circle tours and they’re a great way to see the ‘big’ natural attractions in a day. We hired a car, third time around, and drove them plus some other ‘off the beaten tracks’ place people had recommended (natural thermal spa / tomato farm…best tomato soup I ever had!). Gave us a bit more freedom and we stayed a couple of nights along different places on the south ring road vs always going back to Reykjavik.

It’s truly beautiful tho. Out of season for the northern lights but they can be spectacular there. No doubt I’ll go back there again sometime!