@weirdfizz A technique that is very successful is to play the nightmare in your imagination while you are awake, and give it a happy ending. Make it a story you tell the child, once you have the details. In the story, the monster can be tamed, or transformed into something delightful. Use a magic item to rewrite the story of the dream.
@ToolPackinMama That's a wonderful idea! And I think this child would love turning the dreams into stories.