See this page http://linux.die.net/man/8/useradd
. As mentioned, if you use that technique, you have to supply a passwd already in encrypted form(!).
Normally you'd create the user without specifying the password, then just use the passwd cmd as root
and supply the plaintext passwd twice at the prompts http://linux.die.net/man/1/passwd
As it says, another option is to use --stcin like this
echo plaintext_passwd | passwd --stdin username
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