I believe that the children were terrified of Boo Radely because they over thought the danger of Boo Radely, they fantasied the rumors that were said about him, and turned him into this big scary dangerous monster. I also think that the children's young age contributed to the fact that they were so swept up in the rumors and the alleged danger of Boo Radely.
Though the children were often scared by various things, there’s no arguing that by the end of the book, the children had nothing to be scared of.