I am the OP and bumping this up just to thank everyone who replied because I missed these posts before. My DD started working on harder pieces and practicing for 45 min to an hour a day, and so far so good. She has been really enthusiastic about the idea so far so I don't feel like I'm pushing her. We try to fit the extra practice time in the morning before school because she is an early riser. That we she doesn't miss any play time with friends after school.

My mother is a piano teacher.
I participated in competitions when I was in high school (second place in my age group in my state, woo-hoo!).
My son plays piano.
He has participated in one "concert-competition" so far (arranged by my mother, not by his piano teacher)

The above was just background for where I'm coming from.

IMHO, if your teacher thinks your child should start music competitions, then s/he thinks that your child can do them at whatever practicing level s/he is doing now, so absolutely don't worry about it!

I personally (and I think the same is true for my son) LOVED performing, competing, showing off, etc. I was not a big fan of practicing and only practiced when I had the incentive of a concert/competition coming up.

When I was very young (i.e., elementary school) I did not get stressed out at all. I'm pretty sure my 8-yer-old does not. He certainly does better at his concerts than at his lessons and does not seem particularly worried. As I got older, I would get more worried (i.e., jittery, butterflies, etc), but I still enjoyed performing.

My son does them but in a very low-key way since that is how his studio, his personality and our personality is. He enjoys them and receives good feedback that can help him improve his playing. He probably started with the extremely low-key ones like Spring Festival when he was 7 and practiced 30 minutes a day. Now he does a lot more and higher level ones. He practices 1 hour a day. Many of the kids who do these competitions practice 3 hours a day but that just doesn't leave enough time for life for a child, in my opinion. His teacher is fine with it since he is a quick learner. He still does very well in the competitions.

I did "competitions" as a child, but they weren't really competitions. Usually it was about 5-20 students (there were fewer and fewer as I got older) who played in front of 2 or 3 judges and their (the students') families. The judges would write critiques on your playing. There were no awards or grading.
It was a good way to get a different perspective on your playing. It also taught me how to control stage fright. There were a couple of times I completely bombed and was depressed for a few days, but that taught me the value of being prepared.
Ask the teacher which competitions these are.

My DD is 6.5 and plays her instrument on average about 20-30 minutes a day. I have never considered competitions for her, since we are doing the Suzuki method (very non-competitive) and until now I thought it would be too stressful.

What does your daughter think about this? Can she observe a couple of competitions first before she decides? Perhaps with the teacher, so that the teacher can point out what each competitor did well or not so well?

I don't have direct experience with piano competitions, so I'm not sure how long her practices should be. Seven seems so young, but if it is her only extracurricular it could be fine.

My thoughts: If she enjoys her half hour, start with just practicing an hour a day (or start with an extra 15 min) and see how she does before beginning a competition. If the hour long practice becomes a chore, go back to half an hour.

Putting extra time into piano will mean she has less time to play and play is still really important, especially if she gets to play with friends or siblings. I purposely kept my kids out of a ton of extra curricular activities and I'm glad that I did.

My DD's piano teacher suggested that she starts music competitions next year. She's only 7 but she loves music and performing and wants to do it, even if it means she has to work harder. Right now she does 30 minutes a day. I think we can manage 1 hour a day on average. I've heard competition kids around here can be pretty intense about practicing, and I want to know what we're getting ourselves into.

Do any of your kids do music competitions? Is it motivating for them? Enjoyable? Stressful? Do they get really upset if they lose? How much practice do they need to do to be competitive? (And by "competitive" I mean not necessarily to win, but to put forth a good effort.)