Santa brought my son a 7' 4wt Eagleclaw Featherlight. he is 5 and weighs about 45 lbs. With a reel and line, the whole set up was about $40 on amazon.
Obviously we could have gone a notch or two higher, but for $40, he can have fun with it, and no harm if the accidents happen. He still relys heavily on a two handed cast, because of the weight and length, but it is doing the job for now.
I will also admit that I hijack it often to throw poppers for panfish, and small dries for mountain trout, and it is a fun little stick.