I teach them flat hand hook with a stretch band before they pick up a bow, including practicing a relaxed loose by hooking the stretch band under their foot then releasing the band under tension. Before they release, you can go down the line of students and form individuals hands into the streit hook that they need. Grabbing the string with a fist is one thing lots of new archers do, including adults. I also do a demo with an arrow, no bow, drawing it down vertically (as if the students are looking up from the ground at a note being drawn and demonstrate how and why making a fist torques the arrow but a straight hand doesn't.
I can't say that any one method or demo makes all the difference, but going back to a stretch band for some exercises can't hurt. We've had pretty good luck addressing this issue - as a recreational club we teach a lot of complete beginners. Sometimes we'll use 3 under as a problem solving tool, but generally as a last resort, even with kids, and you'll still want to get them to use flat hands not a fist even with 3 under. (Nothing wrong with 3 under as a trad hook, but we wanted to streamline the instruction and we just haven't needed to go there as a temporary hook for recurve.)