This has become quite long and wordy; sorry, I don't think I can trim much without losing the important parts. The section headings can serve as a TL;DR for each section.
For many people, it's not just a game or simply pretend; for many, it's a lie
Multiple answers here suggest you say it's pretend or a game that everyone is in on. The problem is this simply is not true and is yet another lie.
Telling someone a statement in order to deceive them is a lie, especially if you believe the statement to be false. That is exactly what many families do. I have heard the excuses, that it's done to help their child's imagination and creativity or that it somehow makes them a better person. That doesn't change the fact it's a deception, a bold lie.
Countless parents insist the modern Santa thing is true: Santa, elves, flying reindeer, giving gifts all around the world that night, that some of the gifts under the tree are from him - all of it. This often comes from parents who do not personally believe any of it, so it is strictly a lie and not just a game for them.
I have talked to multiple parents who have participated in the lie whose children were emotionally devastated when they found out their parents were lying to them, typically very depressed or outraged at the parents. Most instances I have seen merely result in the children being annoyed for a while and nothing more, but I have seen enough instances of long term emotional problems to believe that this lie is not only bad for being a lie, but that it is potentially dangerous as well.
In one case the relationship between a father and son was irreparably damaged for years. The young man refused to deal with his father respectfully for a long time, and to this day the relationship is still damaged. Not by the loss of the fantasy, rather the young man felt utterly betrayed by being lied to for years by the person he trusted.
Do not underestimate the damage this lie can have emotionally or socially. Most come through fine, but there are plenty who do not.
Honesty is the best policy; just tell them
I have told all our children from the beginning the whole Santa package is a lie some parents tell their children. Also that they need to leave others alone about it, not bother those who believe. The worst problem we had was the awkwardness when our youngest children told others Santa is fake, or even tell them their parents are lying to them. Awkward, embarrassing, and sometimes arguments erupt.
When my children tell others, I remind mine saying "Remember what I said about leaving others alone about their beliefs. They can believe what they want, and you can believe what you want." Sometimes that would be met with "But we should tell the truth!" to which I respond "That is their parents job. They are not our children, it is not our place. You can talk to others about your personal beliefs, but do not push them onto other children, especially if that is not what their parents want."
One of our more clever children would respond yet again with "Yes it is their parents' place, but their parents are the ones lying and so aren't doing their job, we need to let them know their own parents are lying to them" - that one was the most difficult to deal with and required a careful discussion, but in the end our children realized the lie others were receiving and were good about it.
Those who pick up on things sooner only needed to be corrected once or twice about their over-stepping behavior, and those slower needed a few more times.
Here are some of the effects we have had from all this:
- Our children respect us more for telling them the truth and also for helping them understand others' views and behaviors
- Our children are more respectful to others about others' opposing beliefs
- Our children understand that some beliefs are based on outright lies and that that is not OK
- Our children understand that we don't know why someone else believes what they do (assuming they don't tell us), and that it is proper to not assume the worst (eg: that it's based on lies)
- Our children understand better that different people believe different things, and that that is OK
Anecdote: My own experience with this
We tell ours what we believe to be the truth.
When one of my sons encounters other children speaking of Santa he rightly believes it probably based on lies. He gets annoyed, frustrated, and tells me he believes it a bad thing being done to them, but he tells them what he believes personally and he leaves it at that. I share his sentiments, and he behaves appropriately, so I consider it a job well done.
In our household, we celebrate Jesus birthday on Christmas. Ours know December 25th is likely not the day Jesus was actually born, and they know many others don't share our belief in Jesus. We do not put up a tree, we do not do Christmas gift exchange, and when extended family requests we bring our children over for Christmas presents we firmly refuse. We do allow "holiday presents" as long as they are not for Christmas day. Because of all this, it creates extra friction with others, so this Santa and Christmas-present thing is a yearly family battle for us.
This battle over Santa, Christmas trees, and presents is especially difficult with some of our pagan family members, especially the tree. We had this conversation with them yet again just a couple days ago. One said we don't celebrate Christmas which is nonsense. The irony is strong in my family.
We respect other parents' desires to bold-face-lie to their children, and we expect them to respect our desire to teach our children what we honestly believe in.
Our oldest tell people they don't care about Christmas gifts and they would rather spend time with family. Our oldest child remembers 1 or 2 Christmases early on celebrated with trees and gifts, and that one is the most adamant about family time instead of gift time.
It probably does help that we are fun; I read to them, play board games and video games (I always choose Pikachu in Super Smash ;) ), take walks, nerf battles, and "bushcrafting" (look it up) with them. We need to be parents yes, but we also need to be happy and have fun together.
As is hopefully evident by our lives, our way of doing things differently but having honesty and respect toward each other and to other families seems to have worked out well.
A Possible Negative Side Effect
The clever statement mentioned earlier from my oldest son brings up an excellent point to keep in mind. It may seem obvious to you or I, but this is important for the children to understand...
I believe lying to your children is bad. My oldest son believes the same. Worse, we believe this is a form of abuse - a minor form, but still abuse nonetheless. We don't intervene because it is not our place, just as I would not want others butting into my family's business.
As adults, we should be able to understand simply this minor abuse is not reportable or intervenable, as the abuse does not rise to that level. This is more difficult for children to understand.
I have dealt with abused children and children who are aware of ongoing abuse. A common problem has been children do not understand when it is OK or necessary to intervene and when it is not OK.
Telling children "Many parents are lying to their children. Yes, that is bad, but no we do not do anything" is often confusing to children and to them reinforces "bad things happening to me is ok." That is definitely NOT a thing that you want to reinforce in general, as it contributes to children not speaking up. One child, a victim of sexual abuse, told me she was used to adults telling her that she must simply accept everything an adult says or does, that she didn't know it was ok to do anything about what was happening to her, so she went along with her abuse even though she hated it. I think that speaks volumes to the danger of leaving children ignorant to the reality of abuse.
I have occasional conversations with my own children about what is abuse and what it is not, what to do, and about areas in the middle where people disagree and it is best to let other families handle it according to their belief.
That is, children need to know:
- Non-damaging punishments, where applied proportional to the offense, are not abuse,
- Damaging punishments that no reasonable person would believe are proportional to the offense often are abuse,
- Anything in between is a grey area that they should discuss with trustworthy adults,
- Other actions which either cause damage or which make you feel unreasonably uncomfortable might be abuse and should be discussed with trustworthy adults
- That things in the middle might be considered abuse by 1 person but not by another, and sometimes it is best to let other families handle it according to their views instead of according to our own views.
These explanations to children often need to be accompanied by examples to help them understand the differences and the boundaries. For example...
- Not abuse: 2-minute time-out for repeated mean behavior
- Abuse: 5-hour time-out or spanking for breaking a minor rule the first time
- Abuse: Shaking a child, inappropriate body touching (even outside the clothes), burning
- Abuse: Yelling hollering cursing at children for all their offenses constantly and no matter how slight the offense
And more to the point at hand, things we consider abuse but not major enough to do anything about:
- Lying to children, even about Santa
This is all stuff we need to talk to the children about. They need to understand that it's ok to let other families deal with their personal beliefs and we don't need to sound the alarms to let the world know a parent lied to their child (even though we personally consider it a form of mild abuse), but that they absolutely do need to sound the alarms when something objectively inappropriate happens, that they need to immediately let trustworthy adults know that someone is being shaken or inappropriately touched.
Abuse is much more rampant than most people realize. Don't let your good act of telling your children the truth about other families' lies turn into something bad by way of them keeping their mouth shut when adults are doing bad things to other children.
- Don't tell your children it's just a game everyone is in on; that's another lie
- Do tell your children what you honestly believe to be the truth
- If you want your children to respect other families choice to lie, then tell yours that it's appropriate to leave other families to handle it their way
- Make sure that "leaving other families to handle it their way" does not become "ignore the bad things others do to children" - reinforce the discussion about right vs. wrong and about when we should or should not mind other peoples' business
- Have fun!
If you decide to still do a gift exchange, other answers' idea of making it a known game of pretend and imagination for your family sounds like a great way to handle it and which allows them to blend in with less issue.