I was in shock when I was discussing Xmas and Santa with my now 11 year old niece two years ago. She looked at me blankly and said, "I know Santa's not real....but X (her sister) STILL thinks he's real and she's 5!" I then started to try and convince her otherwise and she kept telling me I was silly. It was a pretty funny conversation in the end.

I think if James was being teased about believing in Santa, there is no sense in beating about the bush and would explain to him straight away that he's not real. I guess some children would be pretty upset about it, but then for others it wouldn't rate at all.