I'd suggest a $100 or so USB microscope. You can use it to look at opaque objects, and you can have the picture on your computer screen. That would be a big help when trying to point out what the kid is seeing.

The ant burning ones are called magnifying glasses.

Anyway, Stereo microscopes generally have less magnification, forget viewing bacteria with these, if you want to study the surface structure of wood or insect eyes, then sure, get a stero.

Otherwise, get a classic 'university-grade' turret microscope with one oil immersion objective.
Consider however that you may need dyes to stain your samples or you won't see all that much unless you get a phase contrast microscope. Consider also that you need thin translucent slices if you want to view tissues. If you just want to explore your saliva or the fauna in forest ponds, then you don't need as much.

Also, there's no microscopic pornography or ultraviolence so I'm pretty sure you can let him operate it all on his own, just make sure he doesn't oil up the normal objectives or store the slides in his mouth.

>Consider also that you need thin translucent slices if you want to view tissues

You can make a microtome out of a bolt and a nut. UNF or UNEF thread pitch is helpful

Screw nut on to end of bolt by a couple of threads.

Put sample in cavity at end.

Pour paraffin wax into cavity and let cool to hold the sample in place.

Take a razor blade, screw bolt into nut by small partial turns and slice off thin slices of your sample on to slides.

taa, daa.

--
BMO

Edmund Scientific [wikipedia.org] sells high quality beginner and student microscopes in all price ranges.

Edmund's prepared slide sets [scientificsonline.com] have been in their catalogs for decades. You really can't go wrong here.

Usually, that means inexpensive and military grade toughness. Two things rarely found in a precision optic :D

However, depending on your budget, you have a lot of options. First, some clarification.

You mentioned stereo being a plus. This can mean two things. Stereo objective, or stereo eyepieces. Stereo objectives are
typically found on lower power scopes used for close up work on things like circuit boards, coins, stamps, gems, jewelery, insects, etc.
Stereo eyepieces ( binocs ) are can be found on both low and high power ( compound ) scopes and are typically an upgrade ( read that, more $$$ )

Considering the age of your interested viewer, you probably want to start on the low end and work your way up if they continue to express
an interest in the field as the years go by. The internet has many sites that sell scopes, some of which I would consider to be in the budget
range for the average seven year old. Some I've used in the past: ( in no particular order )

http://www.microscope.com
http://www.microscopenet.com
http://www.microscopeuniverse.com

Even Amazon and Ebay would probably be valid places to look.

Prices are typically dictated by type, options and manufacturer.

That said, consider the following:

The low end high power setups are going to start around $100 USD for monocular ( single eyepiece ) systems with a 1D stage ( It only moves
up and down ) and LED light source. Probably what you're going to want to look at for a starter scope.

Mid range will get into Binoc ( dual ) eyepieces, better light sources ( variable halogen ), better / more objectives and a multi-dimensional stage.
( stage movement up / down, slide movement forward / back / side )

High end simply builds on the mid range with better quality components and glass.

For a seven year old ? I would start with something along these lines:

http://www.microscope.com/best-seller-omano-om116l-school-microscope-p-741.html
http://www.microscopenet.com/monocular-compound-microscope-40x400x-with-tungsten-light-p-99.html
http://www.microscope.com/omano-omtm-85-monocular-teaching-compound-microscope.html

or, if you really want the binocs, maybe something like this:

http://www.microscope.com/omano-om118-b4-compound-microscope.html
http://www.microscopenet.com/binocular-compound-microscope40x1000x-light-p-415.html

It's certainly an interesting hobby. I have a pair of scopes ( low power and a compound ) on my desk here at home I use to look at whatever
strikes my fancy. Personally, I would rather have the physical scope vs the USB. That's just a personal preference though.

Get a decent microscope. "Child friendly" means "not frustrating" -- good light, smooth focus, good light, real optics, and good light. Mechanical stage for bonus points, because little fingers have a hard time moving the slide around in tiny increments.

Stereo vision isn't a big deal, but with a child of 7, I *strongly* suggest getting a "dual head" microscope. This is designed for teaching, the student has one viewing tube, and the other viewing tube can be used by the teacher or the eyepiece of the second tube can be replaced with a standard microscope video camera eyepiece. That way a parent can help with focusing, which is tricky for kids to learn. You can also talk about what they are seeing and give them a guided tour.

Remember that real optics will give a much, much sharper view than any USB microscope or video eyepiece, so adjust expectations accordingly, but we've found that it is a much more fun family activity when the microscope is set up with video in the second tube so that everyone can see and talk about the video while taking turns looking at the eye-poppingly sharp view through the optic path.

We bought our home microscope here:
http://www.hometrainingtools.com/microscopes/c/10/ [hometrainingtools.com]
they seem to have decent prices on nicer microscopes.