Hold on to your hat.
Our not quite 5 year old daughter knows there is no Santa Claus. Why? Because we told her.
Let me start at the beginning. When The May Queen was born, we wondered how to deal with the whole Santa Claus/Easter Bunny thing. We wanted the focus of these holidays to be the Christian celebration, not the imaginary characters that go with them. Also, we were really uncomfortable with the idea of telling our child that something was true, when we knew full well that it wasn't. In any other area of our lives we would call that lying. Nearly everybody I know has a story behind how they found out the truth about Santa Claus. It is often traumatic. Why would we do this to our child?
So we asked my parents how they handled it. I don't have a traumatic story, because I always knew that Santa Claus wasn't real. But I couldn't remember how I knew this. My mother explained that she had told my brother and I that Santa Claus wasn't real from the very beginning. She talked with us about how Santa is a character, like in a book, and we could enjoy his stories and talk about him and have fun with the idea of Santa without him being real. So this is the approach we have taken with The May Queen. And so far so good. MQ is still young enough that the line between fantasy and real is pretty blurry anyways. She knows that Santa is a character. She also knows that Cinderella is a character, and Dora and Curious George and... This does not keep her from talking about them, and being both excited and nervous when she sees a costumed character. She gets it, and yet she doesn't. And that's OK. That's a blurry line I'm comfortable. Believing is fun. I'm an actress, so I am all about the suspension of disbelief. But it's just that: the SUSPENSION of disbelief. I can enjoy the fun that comes with Santa without ever having to wrestle with the logistics of how he gets down chimneys, and why some kids get Wiis and other kids get hand me down clothes, while still others get nothing at all. We talk about how Santa represents generosity, and when she gets older we'll talk more about St. Nicholas and the various traditions that have led to our version of Santa.
At Easter, the whole Easter Bunny thing is fairly easy to avoid, frankly. But again, we have fun with it, even while she knows full well who hides her basket. It does not diminish her excitement about it a single bit.
When we first started down this road I worried that MQ would be the spoiler for other kids, and I still worry about that a bit. My husband is quite firm on the idea that that's not our problem. But I'm still careful about it. And very proud of how The May Queen handles herself in such situations. When someone asks her what Santa brought her for Christmas, she simply says "I don't get presents from Santa, but my parents got me...." and dives into her list of favorite gifts. So far her friends haven't asked for an explanation. And if they do... well, hopefully she'll handle that gracefully as well.
It's a hard road to take in a world that is so focused on these imaginary characters. That insists that the magic of Christmas is in a child's belief in something that is not real. Even at our church the first words out of nearly every adults mouth are "What did Santa bring you for Christmas?"
Our holidays are still magical. We lie under the Christmas tree and look up at the twinkling lights, and talk about how the lights represent Jesus, the light of the world. We play with our nativity scenes. Last year the May Queen regularly took the baby Jesus and gave him rides around the house on the back of a sheep. Instead of buying presents for The May Queen's grandparents we adopt a family in need, or give to a charity, and write a letter to them telling them what we've done in their name. We open the doors in our advent book and tell the story of Christmas. And yes, we have Santa Claus books and figures around our house. Because Santa isn't a bad thing. But he's a poor replacement for what the real magic of Christmas is, and the gifts that come with it.
(and yes, I am well aware that the Christians co-opted pagan holidays that celebrated the returning of the light, taking these festivals and adding their own Christian bent to them. I know. But I choose to celebrate this aspect of it)