'Impact' as a verb, with or without 'on,' may be criticized on stylistic grounds. Technically it seems to have been around even longer, but the noun is much more accepted in standard English, while the verb is likely to sound like business jargon, in a bad way.
Based on the AHD usage note, I would say 'impact' might not sound quite as bad as 'impact on,' if you had to choose.
But surely it would be better just to say that exercise influences muscle formation, and better still to say that it fosters it, improves it, enables it, has a positive effect on it. Or better with a stronger noun: helps children build muscle.
I might also recommend something a little more idiomatic than 'in young years.' In childhood, youth, adolescence? While children are growing?
impact - ...
Usage Note: Impact in the figurative sense of "a dramatic effect" came under criticism in the 1960s, both as a noun and verb. Complaints that the noun was a pointless hyperbole and a vogue word turned out to be short-lived, and this usage is now is standard: in our 2015 survey, 97 percent of the Usage Panel accepted The program might have a positive impact on our nation's youth. (A similar sentence was accepted by 93 percent of the Panel in 2001.) The verb is a different matter. Many people dislike it because they assume it was converted from the noun in the manner of voguish and bureaucratic words like dialogue and interface, but in fact impact was a verb long before it was a noun—the verb dates from the early 1600s, the noun from the late 1700s. Most of the Panelists still disapprove of the intransitive use of the verb meaning "to have an effect": in our 2015 survey, 78 percent of the Panel (down only slightly from 85 percent in 2001) rejected These policies are impacting on our ability to achieve success. The transitive version was once as vilified, but is gradually becoming more acceptable: in 2015, only 50 percent (down from 80 percent in 2001) rejected The court ruling will impact the education of minority students, and only 39 percent (down from 66 percent in 2001) found the literal sense unacceptable in the sentence Thousands of meteors have impacted the lunar surface. Although resistance to the transitive senses is waning, the intransitive use is still strongly disliked and is best avoided. See Usage Notes at contact, impactful.