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It's not terrible theology, but it could use some nuance.
My daughter is only four years old, and though she doesn't understand a lot about God, she has a sense for Jesus's power. She knows he's strong and near, like when she recently put her shirt on backwards. Upon realizing her mistake, she tried to fix it by pulling her arms through and twisting the shirt around. In one hectic moment, as the shirt was tangled and she got confused, she cried out for Jesus's help as if he were in the next room. She did the same thing during that forest fire scene in Bambi. I've told her Jesus is powerful and she believes me.
There is a little concern, though. It's usually when I'm tucking her in for bed. At some point I've mentioned to her that Jesus is going to come back one day and slay his enemies. He's not just a lamb but also a lion, after all. She reminds me of this every now and then before I kiss her goodnight. It's when she's scared. Just like she snuggles up to her favorite bear, she rehearses the truth of Jesus's evil-conquering supremacy and looks to me for a nod.Yes, I reply, you're right.
I tell her Jesus is going to come back and slay the wicked because it's true. He will (Revelation 19:11–21). So then what's my concern? Well, it is in how she pictures what is wicked. Ursulas and Mother Gothels and Lady Maleficent and the witch who gives Snow White the poisoned apple. These are bad characters indeed, and they may be wicked, but the Bible defines wickedness with another scene. And it's one you won't find in a Disney story.

The Wicked in Psalm 17

In Psalm 17, David, who is God’s specially anointed king, is seeking refuge from his enemies. "Hide me in the shadow of your wings," David prays, "from the wicked who do me violence, my deadly enemies who surround" (verses 8–9). Like the Anointed (“Christ”) whom he typified, David knew about opposition. He had many who were against him, who closed their hearts to pity and spoke arrogantly (verse 10). Those who set their eyes to cast him to the ground (verse 11). An enemy, David says, who is like a lion eager to tear and lurking in ambush (as in 1 Peter 5:8). So he prays, "Arise, O Lord! Confront him, subdue him! Deliver my soul from the wicked by your sword. . ." (verse 13).
So far this makes perfect sense. These enemies are bad guys. My little girl can get this. But then David says more. He elaborates the picture of wickedness: "Deliver my soul from the wicked by your sword, from men by your hand, O Lord, from men of this world whose portion is in this life" (italics added). The wicked are those whose portion is in this life?

Two Types of People

I'm exegetically inclined towards seeing verse 14b to describe God's people as a contrast to the wicked. The treasure and the children mentioned are in reference to God's own as a symbol of his faithfulness. All of this is in contrast to the wicked of verse 14a. But the contrast grows starker in verse 15. Much starker: "As for me," David clarifies — As for me who is different from these men of the world — "I shall behold your face in righteousness; when I awake, I shall be satisfied with your likeness."
So there are two types of people here. There are those whose portion is in this world (verse 14a) and those whose portion is in God (verse 15). There are those who build bigger barns here and those who lay up treasure in heaven. Those who are satisfied with all the amenities of this momentary life and those who say, when all the gifts are stripped away, God is enough.

We Must Ask This Question

Now I'm teaching my daughter that Jesus will crush the wicked so she doesn't have nightmares, and here is Psalm 17 shoved in my face, demanding I line up somewhere. Where is my portion? Do I live as if it's in this world? Or do I make it clear that I have desires for which nothing in this world can satisfy? Can I identify with verse 15? Is God my portion or not? Is he my all-sufficient Savior or do I really just want a genie?
We must ask ourselves these things. We must ponder what John Piper calls the most critical question for our generation, that is, whether we'd be satisfied with heaven if Jesus were not there? If all the bells and whistles of this life were present — all our friends and favorite foods and most fun activities — but no Jesus, would we be okay with that?

Ask, Ponder, Look!

How we answer that question means everything. According to Psalm 17, it tells us whether we're wicked or not. Whether we will be crushed. And no doubt I know where I should line up, indeed where I would line up had not God, being rich in mercy, saved me by grace.
Rest assured that our answer to that question is not left to our own strength.
Jesus died and was raised to create a Psalm 17:15 people who happily behold his face.
That anyone would behold Jesus and be satisfied with his likeness is first and foremost his work. So our hope is in him. We ask and we ponder, but we've trashed the magic eight ball. We look to Jesus. And in our looking to him is when it becomes clear: he is our treasure. We want him, to be found in him, to know him, and the power of his resurrection, that by any means possible we might attain the resurrection from the dead. We press on towards him because he has made us his own. It's in feeling our impossibility of making ourselves Psalm 17:15 people that we look to Jesus and become just that.
So her theology is not terrible. My daughter is only four. And yet, this is a nuance you're never too young to learn.