There’s plenty of people with small hands who play the guitar. Nine times out of ten smaller people confuse the terrible awkwardness that comes with the first week of playing the guitar and mistakenly think it’s because their hands are small. Again, you’re teaching your hands to do really strange movements here. Imagine going to an advanced yoga class having never stretched before, that’s basically what you’re doing.
Now, pick up your guitar, and hold it so the back of the body of the instrument comes in contact with your stomach/chest, and the bottom of the neck runs parallel to the floor. The thickest string on the guitar should be the closest to your face, while the thinnest should be closest to the floor. If this isn't the case, turn the guitar the in other direction. Typically, a right-handed person will hold the guitar so the headstock points to the left, whereas a left-handed person will hold the guitar so the headstock points to the right.
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The neck of the guitar adjoins the "body" of the instrument. The body of the guitar will vary greatly from guitar to guitar. Most acoustic and classical guitars have a hollowed out body, and a "sound hole," designed to project the sound of the guitar. Most electric guitars have a solid body, and thus will not have a sound hole. Electric guitars will instead have "pick-ups" where the soundhole is located. These "pick-ups" are essentially small microphones, which allow the capture the sound of the ringing strings, allowing them to be amplified.
As a beginner, it is best to avoid making a pawn shop, flea market, or yard sale purchase unless you are shopping with somebody who has experience in purchasing a guitar. Having never purchased a guitar, you may not know what to look for in terms of damage or guitar quality. With that being said, a local music retail shop is your best bet. You may also shop online with a reputable company, although be sure to review the business’ return policy.