I think children should know earlier that Santa doesn't exist because children are people too and they do not like to be lied to. When my son figured out the truth he was mad, not because Santa was fake but that he had been lied to. And that is my argument.
Kids picture him managing his elves at the North Pole, soaring through the sky or squeezing through chimneys. Sometimes children participate in the fantasy themselves, adopting the role of Rudolph or Mrs. Claus in games with their friends. These forms of play may cultivate a set of skills known as “theory of mind,” which helps kids predict and understand other people’s behavior. Fantasy play also forces kids to think through hypothetical or counter-factual scenarios, which bolsters their reasoning skills. What will happen if the elves don’t finish by Christmas Eve? What would Christmas be like if Santa didn't exist? This kind of thinking helps children develop models of how the world works and forces them to reason in a causal, rational fashion.This thinking can also help kids envision creative solutions to problems or come up with new ideas. After all, before someone can effect change or design something new, he or she has to be able to see the world differently. Sure, children son't like to be lied to, but Santa Claus is a good lie and when children find out about the truth, they should be old enough to understand that.