The question is about a subset, not a proper subset.
$\phi$ is a subset of $\{1,2\},$ not $\{\phi\}$.
$\phi$ means $\{\}$ and $\{\phi\}$ means $\{\{\}\}$
For $S=\{1,2\}$ inclusion relations of the form $A \subseteq B$ will be:
$\phi \subseteq \{1\}$
$\phi \subseteq \{2\}$
$\phi \subseteq \{1,2\}$
$\{1\} \subseteq \{1,2\}$
$\{2\} \subseteq \{1,2\}$
$\{1,2\} \subseteq \{1,2\}$
$\{1\} \subseteq \{1\}$
$\{2\} \subseteq \{2\}$
$\phi \subseteq \phi$