Startone CG-851 1/8 Pink

Pros:
- Very nice tone
- Holds tuning fairly well
- Very lightweight but still sturdy enough to withstand being left in a toybox
- Very light action so suitable for small fingers
- Despite its short scale-length, it tunes to E-standard, so once your child starts to play properly. they're in the same key as you
- At this price, if your child loses interest, you've not spent a lot of money

Cons:
- The tone is very nice, so you'll be tempted to try and play it yourself, but big-man-hands won't fit very comfortably (if at all)
- Intonation isn't perfect (but if you need this to be perfect, you should probably spend a bit more not not expect wonders from a child's instrument)

This guitar is more than a toy, but is priced like one so if your wee-one is remotely interested (or you want to get them interested), you've nothing to lose.

The only thing I would suggest to anyone who buys it - use an open-tuning for the first while so when your child sits mindlessly strumming, it's at least vaguely tuneful.