Kids are individuals so this may not apply to your nephew at all but my granddaughter is seven, also. I've found what seems to be working best with her is to let her make her own book (she's really into keeping journals and stuff, part of her homeschooling regimen). Anyway, she's got one section of a notebook where she writes down the stuff I teach her in her own hand as I introduce her to new stuff. Chord diagrams, etc. When she gets bored with going over what we've already learned she'll come and ask me to teach her something new. Last night I helped her write down the chord sequence for a 12 barre blues in A (substituting D6 and E6 for D7 and E7 because she's small for her age and just can't quite get those yet).
John