Got my oldest son a used Giant mtn bike (I think it's a Yukon). 26" wheels, 14" aluminum frame, Hayes cable discs, Shimano 8sp drive train. The bike is a few years old and cost me 240.00. I found a 2007 SID fork used for 150.00 and swapped that for the cheap Suntour junk that came with the bike. Then swapped out the stock wheels for some Mavic crosslands that I had collecting dust. Total investment was 390.00 for a very trail worthy kids bike.
He's 9 and was riding a 24" wheeled Specialized Hot Rock. The Hot Rock costs the same as his new/used bike did.
Now he has disc brakes, a frame he can grow into, Mavic wheels with UST tubeless tires and a fancy SID fork. The fork is fantastic and the dual air allows it to be adjusted to suit his ultra lightweight.
400.00 is a lot to spend on a kids bike that he will outgrow in a few years. But we don't mind because he loves riding with dad and I have 2 younger kids who are waiting in line for the hand-me-downs.