Wetsuits are designed to be snug. The fit should be skin tight like in the product images on this site.
The reason you want them snug is because wetties work by trapping a thin layer of water between your skin and the suit rubber. Body heat then warms that layer of water to keep you comfy.
Wetsuits also have a lot of stretch, so even an ideal fit will give your child some room to grow. But we know what it's like buying for kids - you want to get max use out of whatever it is. So to help dissuade you from buying a wetsuit that looks like a tent on your child, when it's time to go up a size we offer up to 30% discount on new wetties when you return your old one.
But don't sweat, if you do happen to choose a dramatically wrong size then let us know and we can exchange it.