DD5 outed the tooth fairy earlier this year. She started loosing teeth early and by the third one she asked outright who the tooth fairy was. I asked her who she thought it was and said she didn't believe in fairies so she wasn't sure. I can't remember the whole conversation but it became apparent she felt pretty confident the tooth fairy wasn't real, though she was unsure how it worked. She suggested we look it up online, LOL
So I figured I was better off telling her than her finding out from the PC! She was fine and I explained why we pretend and how it adds a little bit of magic (problem is dd isn't a big believer in magic).
She's kind of on to the easter bunny - she believes it's someone dressed up in a bunny suit because a rabbit could never carry all those eggs. Santa she's still accepts - I think because there are so many things that help her support her belief - we even have a post box here in the city you can use to post a letter to santa and he will reply. But there have been a few times she has gone to ask something about santa and then stopped herself, which is when I suspect she is having doubts. But I think for now she likes to believe.
Re the OP - I'd tell. I just think you get to a tipping point where they can see through it and I (and this is just my personal feeling) feel it's more respectful to them to recognise that they have figured it out (unless they're obviously wanting to believe like some of the other posters have mentioned). Especially if they are having a hard time reconciling a perception of injustice. I wonder if for some (though no doubt not all) of our kids a bit of an explanation of the history of Father Christmas might help? How I am going to explain the santa post box I don't know. Perhaps I'll just mention that adults get a bit of a kick out of the magic of santa too.
