Both Andrés Segovia and John Williams started learning to play the guitar when they were six. Five shouldn't be too young, I should think, especially if the young 'un is showing an interest. If you wait too long, the interest might shift to something else.

A uke might be a good idea, but Strunal and Jasmine make inexpensive child-size guitars. Various sizes, actually, from a bit larger than a baritone uke to one that's only slightly smaller than a full-size guitar. Check Jasmine in the Elderly Instruments catalog or web site. Example HERE. I've seen a couple of them. The sound is passably good and they're solid and well-made.   

Don Firth