I agree with Mooh that the needs of the song should dictate the fingering. But for folks who are just starting out on guitar, I recommend that you get accustomed to your nephew's fingering (using fingers 2, 3 and 4, with index finger free). I recall having difficulty with it when I was first starting (32 years ago, as a 10-year-old with small hands), but with practice it became second-nature. If you don't practice it, you'll never develop the facility in your pinkie. You'll always be able to do your alternate fingering (using fingers 1, 2, 3).

For lots of folk and blues music, it's nice to be able to alternate smoothly between the G chord and the C chord, which your nephew's fingering facilitates. You'll hear this alternating G/C thing in lots of songs -- one good example is Dylan's "It Takes A Lot To Laugh, It Takes A Train To Cry" on the Highway 61 Revisited album.