I'm sure you've heard the saying that necessity is the mother of all invention!
Since she is so young, maybe you can think of some things she is interested in and wants to improve upon. Another approach is to consider a problem that needs a solution. Once you have some ideas, present them to her. She may get really excited about one or it may help guide her to another idea of her own that is practical and simple enough.
For example, maybe she often loses her pencil and she wants to invent a pencil keeper that attaches from the pencil to her wrist or clipboard or something. The important thing is for her to do something that is relevant to her. You will have to help guide her in order to make it practical and probably help her to keep it fairly simple. At the same time, really encourage her to use her imagination and creativity to design this invention.
If you'd like more help, school projects are one of the things I do to help kids in my business, Accelerate Academic Services. My website it www.acceleratekids.com if you'd like to check it out.
Good luck! Who knows you guys might actually invent something that will help others and make millions!