Good advice from Frank. Probably not much he doesn't know about folk guitar.

My two-bits worth:-- First of all, you want to decide on whether you want a steel-string guitar or a classic nylon-string guitar. This might depend a lot on the kind of music you're interested in. A good classic guitar with nylon strings has a rich sound that goes well with ballads and such songs. But not necessarily that appropriate for, say, bluegrass. Nylon strings are a lot easier on the left hand (less that half the tension), and if you hold your left thumb behind the neck instead of wrapped around it, reaches will be no problem, even for fairly small hands.

Don't put nylon strings on a steel-string guitar. It won't hurt the guitar, but the sound will be pretty anemic. Do not, under any circumstances, put steel strings on a classic guitar. Lightly constructed, the steel strings can pull a classic guitar apart.

If you feel that what you want to play demands the sound of steel strings, it's possible to equip the guitar with low-tension or silk-and-steel strings that are a lot easier on left hand. The sound you get will depend on the guitar, but generally they sound pretty good on almost any reasonably well-made instrument. One possible route to go would be to use low tension or silk-and-steel strings until your hand develops some strength, and then shift to regular steels.

I've played nylon-string classics for fifty years, but I'm primarily a balladeer.

Don Firth