Everytime  I create a new Moodle installation for a school or user one of the first changes I have to make is the password policy.  By default Moodle has pretty strict rules on new users passwords:  At least one digit, at least one upper-case letter, at least one alpha-numeric character and at least 8 characters long.   If you want to change these settings you need to go to Site Administration -> Security -> Site policies.    Scroll down a bit and you will see Password Policy settings near the end of the page.   Change them to whatever you want them to be.