My eldest boy is 8 and he has just upgraded to a 26" wheel bike, we built it from my old parts at the shop, dirt jumper frame 11" centre to centre and a non suspension corrected rigid fork. built up into a great bike! didn't cost a great deal - you probably have a ton of old kit kicking around i bet - and you can pick up a little frame pretty cheap second hand - tart it up a bit and get the little'un to help build it. Good fun to do - they learn a bit and actually end up looking after it - and if they are lucky upgrades are easy to source!
Bikes owned..... far to many to list, but sold the best ever, my Indy Fab Deluxe - rigid - 950 XTR. I HAVE FINALLY FOUND A PICTURE OF IT!!