Before you commit your daughter at such a young age to the training hours associated with team membership, you might reflect on what you and she can hope to gain from that arrangement. We parents are undoubtedly pleased whenever someone suggests that our kids have some--any--sort of talent, but what benefit do you expect your child to derive from devoting to gymnastics those long hours that could otherwise be devoted to, say, playing, reading, music, her studies, or developing any of her other talents that might be undiscovered at age five?
When you discuss this subject with parents at your gym or on a gymnastics board like this, it’s rather like asking members of a church (or a cult!) that you've just joined if you've made the right decision: few people excepting the true believers are available to join the conversation. When someone like gymbratsmom offers her heartfelt endorsement that she'd “do it all over again", you may wonder if the parents of all those girls who leave the sport within a few years would tell you the same thing--but they're not here to respond to your question. (USA Gymnastics membership figures suggest that about half of the girls who join teams quit before Level 6.)
I can offer a slightly contrarian view. From my perspective, here are a few points that support the idea of a girl joining a gymnastics team at a young age:
Parental support and the child's enthusiasm may be far and away the most important ingredients in this mix. Anders Ericsson, the leading psychologist in the field of expert performance, has repeatedly indicated that what you and I (and your daughter’s coaches) might call "talent" is vastly overrated: It's all about the kid loving what she's doing to the extent that she'll put in the necessary effort despite the hardship, along with her parents willingness to provide the necessary emotional and financial support.
Part of that mix could be seeing your daughter accomplish at a young age what older girls may just be learning. It wouldn’t really matter if, in fact, all the girls take roughly the same number of years to reach a given skill level regardless of the age at which they begin training (or if they will all end up in the same place) if that perceived age advantage provided enough of an emotional boost to keep you and your daughter happy in the sport.
Otherwise, it might be helpful to start her off early if you think that your family is willing to make the sacrifices that would allow your daughter to become an elite athlete. Similarly, if you hope that your daughter will compete for a college scholarship in gymnastics, it might be helpful to have her reach a high skill level by her sophomore year in high school.
However, here are a few points that argue against committing to relatively long training hours at a young age:
In gymnastics, unlike in the well-studied areas of expert performance such as music or chess, the long years of dedicated practice that are required to develop expertise can be ended by capricious injury. For example, if your daughter devotes 12 to 25 hours each week to the piano throughout her childhood she'll likely still be playing beautifully 70 years from now, but if she chooses to devote all those hours to gymnastics she'll still probably quit the sport before she finishes high school and it’s a good bet that she’ll never do a back tuck on a balance beam once she leaves college—and injury could drive her from the sport years earlier. (There are about nine Level 5 girls for each Level 10 athlete; perhaps injury has a lot to do with that.)
While it seems that the combination of her apparent love for the sport and your willingness to support her efforts argues for her success, it's nonetheless obvious that she isn't yet even dimly aware of myriad other activities that she might love and that you might just as enthusiastically support. (At your daughter's age, my kid couldn't decide between becoming a veterinarian or a paleontologist; it turns out there may be other fields that are just as interesting, and almost all of them are still unknown to her.)
According to
http://www.collegegymnast.com/ about 3% of high school-age gymnasts go on to compete in college; perhaps fencing (79% of high school fencers compete in college) might be a better bet if a scholarship should become a goal.
I didn't see any real advantage to moving my child to a team at a young age. I happened to choose to keep my daughter in a cheerily low-pressure pre-team class for a couple of years beyond when she might have competed. There may be many ways that parents can help their little gymnasts to find their balance; I try to help mine by limiting her training time to fewer hours than most of the girls at her level devote to practice, both by choosing a gym with a relaxed and flexible schedule and by having her skip some of the practices that are available to her there. (She uses most of those saved hours for extra work to develop the math and writing skills that she'll need to succeed as an adult.) We have no interest in an elite track, and little interest in a gymnastics scholarship; I doubt, anyway, that the opportunity to compete as a Level 10 for six years instead of four or five years before she graduates from high school would matter much. We're not trying to produce a gymnast; we just want her to become a healthy and happy adult, and so far it seems that keeping her contentedly involved in the sport at a level that we hope will reduce the probability of burnout and injury is a reasonable part of our effort to reach that goal. It would be different if we prioritized gymnastics, but--although she loves gymnastics just as much as your daughter loves it--the sport is just part of my daughter's life, and we realize that in the long term it will be far from the most important part. This works for me, but your child is undoubtedly different than my child, and YMMV.
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