DD figured it out at 3.5 and I was actually a little sad. Her logic was that, "no one can read minds" and Santa knowing what millions and millions of kids want requires mind-reading. (I guess she wouldn't have figured it out if we had counter-proposed that Santa used a massive database with a web front for all the parents to "order" from. :-) )
Of course, we still do Christmas and Easter Bunny as if she didn't know, but it was way more fun for us when she believed :-)
Having said this, this issue became an important part of our battle with DD's Montessori school. We wanted DD accelerated (skipping K.) They initially told us that the reason they never accelerated was because of Montessori's idea of "planes of development." They told us that kids transition from the "first plane" to the "second" at age six.
As part of our advocacy we researched precisely what Maria Montessori considered as differentiators between these two "planes of development." It turns out the key difference (according to MM) is the ability to distinguish between fantasy and reality-- the ability to know when something (like Santa) is "make-believe."
Although our advocacy ultimately failed (which makes us so sad I cannot even articulate...) showing them that Montessori's idea of what generally happens at age six is really analogous to what Ruf's giftedness research suggests is happening with gifted kids at an earlier age, really went a long way in our convincing them that "the planes of development" is a continuum, and that modern understandings of giftedness have a lot to say about the same sort of things Montessori was saying 100 years. Too bad they couldn't get past the size of DD on the playground. But as DH says, 'they did us a favor-- DD will be immensly happier and learn way more homeschooling next year..." *sigh*
