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Researcher Professor Dieter Wolke said: "Nightmares over a prolonged period can be an early indicator of something more significant in later life."
Children who have night terrors or frequent bad dreams are up to three times more likely to suffer symptoms of psychosis later.
A study found nightmares at the age of 12 tripled the chance of hallucinations and delusions, and night terrors doubled the likelihood.
Children aged two to nine who often had bad dreams were 56 per cent more at risk.
Lead researcher Professor Dieter Wolke, from the University of Warwick, said: "We certainly don't want to worry parents with this news; three in every four children experience nightmares at this young age.
"However, nightmares over a prolonged period or bouts of night terrors that persist into adolescence can be an early indicator of something more significant in later life.
-Mirror
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