My 5 year old has a cavity and dentist say it needs to come out?

If the cavity is that big, then it makes sense to remove the tooth rather than attempt a large filling or root canal on the tooth. Most extractions can be done with local anesthesia and maybe nitrous oxide (laughing gas). The risk of general anesthesia (and the associated cost of having the procedure in a hospital) is usually not worth it to extract one tooth. You can ask your dentist about space maintenance. Her first adult molar should come in around age 6, but the premolars that will replace her baby molars won't come in until she's 10-11, so its reasonable to keep that space with an appliance.