I would not find fault in a five year old that though he/she lived in Utopia because he/she didn't know about the bad news happening across the world because little kids like utopian places and they will want to make their world utopian. Balance means we can't pull them down with all the war, Destruction, And injustice because that would break their hearts but they have to accept reality after a while. Accepting the present is the first step to changing the future.
Kids as you say, Are not biologically dumb. There is a lot of evidence on my side that at 7 (for most people) you develop enough neurons to be able to be smart. We have to give them the space to be smart, Beacuse we assume they are dumb and innocent, But they are only so beacuse we condition them to do so. We have to change that for a better world.
"Miss Cambell why are the people so angry and yelling in the streets? "
"Uh. They are not yelling billy they are having a party in the street and lighting giant candles. "
"Now class we live in a perfect world where you can be whatever you want when you grow up. You can be a NFL quarterback even though there are only 64 position available you can be one when you grow up. Everyone of you will get your dream job and live in a nice house. "
Don't lie to children because you will only set them up for massive disappointment.