I want to have an opinion on, is it okay to let kids live in their fairy world imagination or we should give them logic and reason as what they believe in is not true? Like my daughter believe that there are fairies, or that someone lives on Moon... so should I tell her there are no fairies?

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Let your daughter live in this fantasy world now. This is what childhood is all about. This innocence is lost once we become practical and search for logic in everything. As she grows up and learns more, she will herself come out of this phase and become practical. Till then let her enjoy!