do i spell 'colour' or 'color' in my book?

I think this is something your publisher will help you decide. I would personally spell everything the British way, but if you have the characters talking then make sure they say things like 'sidewalk' instead of 'pavement' etc. If you decide to self-publish then I would say you should get a profesional edit first, if you go down the traditional publishing route, then the editor your publisher asigns will sort out stuff like whether you use American or British spelling.

Colour. I like that spelling better than Color.

Me personally, I'm writing a story set in England, but I spell things the way I learned to spell them according to the country I live in. The only difference is if the character is speaking, then I use British English as opposed to American English. That's just the way that seems right to me. As the author, I'm writing in my dialect for the narration, but if there is character dialogue then I write in their dialect. In one case however, when I had to compose a letter as written by one of the characters, I did use the spellings he would have used, being someone from England :) You see how that works? When the character is speaking or writing, I write like them. It's how I get the realism, and accuracy.

You're writing the book in the UK therefore the correct spelling of "colour" should be used. If you use "color" your book would essentially contain spelling errors. It doesn't matter that you are writing about American kids and that it's set in the USA.

Well over here US books use their spelling

use colour as that is accurate if you were to sell it over here

just because it's written about americans doesn't mean you have to spell it wrong like them lol

If you are writing about American kids set in the USA, I recommend spelling 'color'. It will help to create the feel of the book. Imaginr reading a book that an American has written about british people, yet they use american spellings. It us up to you though ! :)

Colour is anglo-french based. Color is latin based. Some scholars, including British ones, believed that those words that have latin roots and were later modified by the french to mimic the pronunciation should drop the 'u'. Today, I don't think anyone really cares as long as you are consistent. Some words look funny, though, like savoury, harbouring, and neighbourhood to name a few.

I you are making the kids say it then it would be color but on any ordinary time it would be colour.

I spell it "colour" no matter what, 'cause I'm a stubborn bastard. Anyway, what does setting matter? If it was set in Poland, would you write in Polish? Same question.

You should spell it in accordance to the dialect of the readers. So if you want to appeal more to British readers wanting to read about America you use colour and if you want to write for American readers you should use color.