When Grandma Turns into a Dragon: Why Kids Blend Fantasy and Reality

By Heather Weigel, MAT; edited by Mary McKone, Ed.D.

If your child insists Grandma turned into a dragon and flew them to the moon, they aren’t lying or confused. Their imagination is working just as it should at this stage of brain and nervous system development.

From about age 2 through the early school years, it’s normal for children to confuse what is made up and what is real—often casting real people in their stories. Understanding why this happens helps you respond confidently and supportively.

This piece explains what’s happening in your child’s brain and nervous system as they blur fantasy and reality at different ages. It covers how these timelines may differ for autistic, ADHD, and AuDHD kids, and offers practical steps you can take to support them. Read straight through, or skip to the age or section most relevant to your child.

Understanding Kids’ Stories: Imagination, Magical Thinking, Confabulation, and Lying

Here’s a quick guide to what’s going on when your child says something that isn’t true:

• Imagination or pretend play: Your child knows it isn’t real and is playing for fun. For example, if your child declares the floor is “lava” and hops across the couch cushions, they’ll admit it’s just a game if you ask.

• Magical thinking: Your child genuinely believes it because their brain is still building its “reality filter.” There’s no intent to deceive. For example, your toddler insists the dog talked to them at breakfast—not a fib, just normal development.

• Confabulation: Your child genuinely believes it, but their brain is automatically filling a memory gap. This is common in ADHD and isn’t intentional. For example, your child swears Grandma called an hour ago and can’t explain why—they’re not making it up, just patching a memory gap.

• Lying: Your child knows it’s not true and says it on purpose to get or avoid something. Lying requires knowing you can plant a false belief in someone else's mind — a capacity called 'theory of mind' that usually appears after age 4. For example, your five-year-old blames the dog for the marker on the wall and checks if you believe it.

Most stories about real people are examples of imagination, magical thinking, or confabulation—not lies. Here’s how these show up as your child grows.

Why Kids Mix Fantasy and Reality: Neurotypical Milestones, by Age

Pretend play and magical thinking are fun and have clear developmental purposes. Pretend play sharpens children’s ability to read social cues—like voices, faces, and gestures that tell “play fighting” from real conflict. This builds theory of mind (understanding that others have their own beliefs that may differ from your own) and later social skills. Fantasy play gives a safe way to practice big emotions—a pretend monster is much less threatening than a real one—while also expanding language and cause-and-effect thinking by inventing and testing imaginary rules.

Young children aren’t bad at telling what’s real—they’re still building that skill, step by step. The ages below reflect neurotypical development; neurodivergent kids build these same skills on a different timeline and path, which we cover later in this piece.

Before age 2: Pretend play is just starting. Most play is about using things the way they work in real life (like holding a toy phone to their ear). Around 18 months, kids start to really pretend.

Ages 2–3: Magical thinking is strongest. Memory, imagination, and wishes all blend, and kids don’t yet understand the idea of “making things up on purpose.” If your toddler insists that closing their eyes makes them invisible — and gets genuinely offended when you say you can still see them — that's not a fib; it's just how their mind works at this age.

Ages 3–5: Kids can sometimes tell pretend from real, but their judgment is inconsistent and easily swayed by how things are presented. At this age, what you say and how you say it matters more than logic. If you tell your child broccoli gives you “laser vision,” you might see them eat it just to find out. Some kids are more skeptical, others more trusting—both are normal.

Ages 4–5: Kids begin to understand that other people can have different beliefs (called “theory of mind”). This is also when true lying first becomes possible—they realize they can plant a false idea in someone else’s mind.

Ages 5–7: Kids become better at using evidence to tell what’s real and what’s pretend. By age 5 or 6, they can usually separate TV fantasy from reality and will start asking more detailed questions or fact-checking.

Age 7 and up: Most kids develop more consistent, adult-like judgment, though their brains are still maturing all the way through adolescence.

These stages reflect how a child’s brain grows and develops over time—a pattern that traces the maturation of several specific brain systems, which is worth unpacking next.

How the Brain Sorts Fantasy from Reality: Neurotypical Development

The ability to tell what’s real from what’s pretend develops in stages, as a child’s brain matures. This describes neurotypical brain development; neurodivergent brains can build these same systems on a different path, covered later in this piece.

At first, kids use a slow backup system: executive function (the “stop and think” system) and simple rules or schemas for how the world works—like animals don’t talk, and people can’t fly. They only reason something is pretend if they pause to think. Excitement, fear, or a persuasive adult can easily override this, so their judgment is often inconsistent from ages 3 to 6.

By age 7, a faster, “reality filter” starts working automatically—sorting memories and ideas as “real” or “pretend” without needing slow reasoning. This brain system, the orbitofrontal cortex, is tucked behind the eyes. It keeps sharpening into adolescence and early adulthood.

Other brain regions fill out the picture. The prefrontal cortex (PFC) controls impulses—pausing before acting on an idea, real or imagined. The hippocampus (the brain’s memory-formation hub) uses source monitoring to tag where memories came from (did I see it, imagine it, or hear about it?). The default mode network, the brain’s storytelling network, sparks daydreaming and replaying memories. All these systems are still developing in young children, which is why imagined events can feel as real as actual ones.

The amygdala—the brain’s alarm system—reacts to pretend threats almost as strongly as to real ones. That’s why a scary story can feel truly real to your child.

Bottom line: the “reality filter” is one of the last brain systems to finish developing. If your child’s sense of real and pretend seems shaky, it’s not a flaw or a discipline issue—it’s normal brain development.

How the Nervous System Shapes Fantasy and Reality: Neurotypical Development

Distinguishing fantasy from reality depends on both a child’s thinking and their physical state.

The autonomic nervous system works mostly outside conscious control, with two main modes: a “gas” pedal (sympathetic response) that revs the body up, and a “brake” pedal (parasympathetic response) that calms it down. The “brake” runs through the vagus nerve, linking brain and body. Polyvagal theory, developed by Dr. Stephen Porges, describes two branches: the ventral vagal branch (the main “brake” for calm engagement) and the dorsal vagal branch (a last-resort shutdown mode when threat isn’t resolved). The dorsal vagal branch also has a rest-and-restoration aspect of the parasympathetic system.

The amygdala decides which pedal to use based on threat perception. When it detects a threat, it dampens the PFC’s activity and overrides reasoning. Alarm and reasoning systems act like a seesaw: as one rises, the other falls. That’s why telling a scared child “the cartoon vampire is not real” often fails—their reasoning is offline because the amygdala has redirected the brain’s resources to its end of the seesaw.

Porges has spent much of his research studying how play shapes this system, specifically pretend play being a “workout” for the nervous system. A good pretend game deliberately revs the “gas” pedal (the thrill of being chased by a “monster”) and then resets (laughing), giving a child repeated practice shifting between activation and calm. Ideally, the ventral vagal “brake” keeps pace with the “gas” pedal, preventing a tip into real fear.

But sometimes, pretend gets stuck in “real.” A scary story or an overstimulated child can make the amygdala treat pretend as real. The “gas” pedal stays on; the “brake” can’t help the body calm down. This triggers a stress response: a racing heart, tears, and an urge to run away. The child isn't overreacting — their system is responding as if the danger is real.

A child’s ability to sort pretend from real is closely tied to how their body handles excitement and fear. Here’s how this usually looks at different ages:

Ages 2–3: No automatic “reality filter” yet. Self-soothing is just starting, so scary stories can trigger big reactions.

Ages 3–5: Reasoning helps a bit, but fear can easily take over. The alarm system is still stronger than logic.

Ages 5–7: Reasoning and self-regulation strengthen. Practice with pretend play builds nervous system resilience.

Ages 7 and up: The automatic reality filter comes online and usually calms scary ideas

before panic sets in (the amygdala cannot swing the seesaw fast enough). The nervous system can now handle more excitement or fear without losing reasoning skills.

In short: As both systems grow, kids become less likely to get “stuck” in pretend or fear over time.

Parent tip: Offer comfort before logic. Calm your child’s body first, then gently check what’s real—logic works best when your child feels safe and settled.

How Neurodivergent Kids Experience Fantasy and Reality

Neurodivergent children build these skills on a different timeline—not a worse one. Their brains are wired differently, which can lead to similar behaviors for different reasons.

Autism: What’s Different About Pretend Play and Fantasy?

Two main things work differently. First, the “theory of mind” system—understanding that others can have different thoughts and feelings which may be separate from your own—develops differently in autism. Pretend play is an early sign: treating a banana as a phone means holding two realities at once, knowing it is a banana and pretending it is a phone. This is called “decoupling”: the ability to hold two versions of reality apart at once, which is the cornerstone of later holding more sophisticated ideas, plans, or multiple perspectives.  Most autistic children can understand someone else’s pretend act and carry out a pretend instruction when prompted, but are less likely to invent pretend scenarios on their own.

What's consistently harder is generating a pretend scenario spontaneously, from scratch, without someone else supplying the idea first — the capacity for decoupling seems to be there; it just doesn't switch itself on unprompted the way it does for most children. If autism only delayed pretend play, you’d expect children to invent scenarios later. Instead, play often stays adult-led—needing someone else to start and steer it—even after peers are playing on their own. This is a difference in how pretend play happens, not just when it happens, so researchers see it as a different path rather than a delayed version of the usual one.

Second, autistic children often have less flexible nervous systems, with reduced heart-rate variability — the natural, moment-to-moment shifting in the gap between heartbeats that reflects how easily the brake and gas pedal can hand off control. Less variability means less flexibility. Their ventral vagal brake may be less available, so shifting between excitement and calm — the core of a pretend play "workout" — doesn't always happen smoothly, and once distressed, it's harder to return to calm.

What this looks like at different ages:

• Ages 2–3: Autistic children may be slower to start both spontaneous and adult-led pretend play. Sensory differences (like needing more input to notice a feeling or sound) can also affect imagination and pretend skills; kids who need more sensory input often have lower pretend-play skills.

• Ages 3–5: Many autistic children still need an adult to help with pretend play. Imaginary friends are less common, and often a favorite object (like a toy) gets a personality instead of an invisible friend.

• Ages 5–7: With language support and practice, many autistic children partially catch up in games with clear rules and roles. Open-ended, spontaneous fantasy is still harder to generate on their own.

• Age 7 and up: Spontaneous, open-ended fantasy may keep developing slowly, but structured pretend play grows with your child. Research also shows autistic children tend to tell fewer lies overall, and when they do, it’s often to fill memory gaps, not to cover up the truth.

ADHD: Why Imagination, Memory, and Focus Work Differently

In ADHD, the part of the brain that drives daydreaming and imagination (the default mode network) isn’t easy to quiet when your child needs to focus. This means daydreaming and “getting lost in thought” can last well into adulthood because it doesn’t coordinate smoothly with attention systems. Because the default mode network helps build memories and narratives, the brain sometimes fills memory gaps with made-up details it generates as plausible—this is called confabulation, and it’s not lying.

On the body side, ADHD brains and nervous systems tend to run at a lower “idle” or arousal level across the regulatory system. The brain’s alarm system (amygdala) and its ventral vagal “brake,” measured by reduced heart-rate variability, are both less active than in other kids, drawing on the same underaroused baseline. Both systems are less available precisely when they are most needed, like during a spooky read-aloud. This means your child may seem less alarmed by scary things but also has a harder time calming down when upset. Instead of a seesaw (one side up, one down), think of both sides being low at the same time—emotion and calm can both be harder to access.

As kids with ADHD grow up, their brains may become more reactive instead of settling down, making big feelings last into adulthood. This is why experts see ADHD as a different path, not just slower growth.

What this looks like at different ages:

• Ages 2–3: ADHD isn’t usually diagnosed this early. Most toddlers have big feelings and short attention spans, so it’s hard to tell the difference yet.

• Ages 3 to 5: Measurable differences emerge here. Slower self-regulation gains starting at 3 are linked to higher ADHD symptoms at age 7. In practice, this can look like bigger, longer reactions to everyday ups and downs—including pretend play meltdowns. A twenty-minute meltdown over a “broken” pretend sword isn’t defiance; it’s a self-regulation system still catching up.

• Ages 5–7: As school demands increase, an unquiet default mode network stands out. Slower self-regulation gains mean higher ADHD symptoms.

• Age 7 and up: Confabulation remains common, as the wandering mind keeps filling memory gaps. Between 9 and 14, children with ADHD often show weaker wiring between the amygdala and prefrontal cortex. Emotional control lags.

• Into adolescence and beyond, the amygdala’s trajectory may not catch up—reactivity may even increase, so intense reactions can persist or sharpen. This is still an open research question.

AuDHD: Why the Combination Creates a Unique Path

Between 40% and 70% of autistic people also meet criteria for ADHD. AuDHD isn’t just autism and ADHD added together. Brain studies show that autism-linked traits still create “stuck” patterns, but the ADHD-like traits don’t follow the usual ADHD pattern. Instead, ADHD symptoms in AuDHD often come from the same brain rigidity as the autism side, not from the separate cause seen in ADHD alone. That’s why many experts now view AuDHD as a unique brain profile, not just a combination of both diagnoses.

What this looks like at different ages: There isn’t much research on AuDHD as its own category, so we use what’s known from autism and ADHD.

• Ages 2–3: Likely to show autism-patterned delays in the onset and spontaneity of pretend play, since research suggests the autism-linked mechanism dominates in this area even when ADHD is also present—so pretend play may still need adult initiation, as in autism alone, even before any ADHD traits show up.

• Ages 3–5: Kids are likely to need help starting pretend play (like in autism), and once play begins, may have trouble settling down or stopping (like in ADHD).

• Ages 5–7: Slower self-regulation gains from ADHD may combine with autism’s reduced vagal flexibility, making “stuck” moments longer and harder to resolve. This combination hasn’t been directly studied.

• Age 7 and up: Both autism and ADHD traits can last well past age 7, so it’s likely that AuDHD’s timeline for sorting fantasy and reality does too.

No matter your child’s brain profile—neurotypical or neurodivergent—one thing is true: real people often show up in their stories.

Why Your Child Casts Real People in Their Stories

Why do kids use Grandma (or loved ones) in their stories instead of strangers?

It’s because your child’s imagination and memory use the same “filing cabinet.” The people they love and notice most—like you, Grandma, or a teacher—show up most vividly in their stories. Being part of their story means you’re important to them, not that your child is confused about reality.

There’s another layer: casting a real person in a fantastical role lets a child process feelings about that relationship. Turning Grandma into a dragon may express how safe or powerful she feels. Making a parent the hero who defeats the monster can help a child work through their own feelings of vulnerability. The story isn’t a claim about the person—it’s a way to process feelings using the most meaningful character available.

Imaginary Friends: What They Mean

Imaginary friends are a common, well-documented part of childhood, most often appearing sometime between ages 3 and 8. These friends provide companionship, help kids practice conversation, share secrets, and manage stress or fears. When your child blames a mess on an imaginary friend or tells stories about them, they’re using available characters (real or invented) to build important narrative, social, and emotional skills—just like when Grandma appears as a dragon.

What Parents Can Actually Do: Practical Tips

Get curious before correcting. Say: “That’s an interesting idea—what do you think would happen if that were real?” This opens gentle reality-testing and shows you’re listening.

Use "in the story" and "in our world" language. For example: “In the story, the dragon could fly—in our world, what do we know about dragons?” This builds the distinction gently, without shaming your child for not having it yet.

Calm the body before using logic. If your child is scared by a story (like a monster under the bed), acknowledge their feelings first: “It sounds like your brain is imagining something scary.” Then check reality together: “Let’s go look.” Skipping straight to logic usually doesn’t work because the nervous system isn’t ready yet.

Use the four-category framework (imagination, magical thinking, confabulation, lying) to guide your response:

- If it’s imagination or magical thinking, join in and enjoy.

- If it’s confabulation (especially with ADHD), help fill memory gaps—recap what really happened, and avoid calling your child a “liar.”

- If it’s true lying (on purpose), talk about why honesty matters.

For autistic children, use their special interests to start pretend play. Watch for imaginative play with objects (like giving a toy a personality) rather than expecting open-ended story talk.

Avoid: publicly calling your child a liar, demanding they “admit” a story is false, or treating every made-up story as a discipline problem. These responses damage trust and don’t help your child build skills any faster.

Narrate screens in real time. Kids under 5 may not know TV isn’t real so screens can reinforce confusion. If you’re watching together, say “that part is pretend—animals can’t really talk.” This quick, in-the-moment comment does real legwork.

Consider primitive reflex integration as an indirect tool. Primitive reflexes are early movement patterns that fade as the brain matures (the same brain systems behind reality filtering and impulse control). Working on these isn’t a fix for fantasy-reality confusion—which is normal at this age—but it can help widen a child’s window of tolerance (the ideal emotional zone before dysregulation), giving the nervous system more room to manage excitement and pretend play without getting overwhelmed as quickly.

When to Look Closer: What’s Outside the Usual Pattern

For almost all kids, blending fantasy and reality is a normal phase—not a problem. Watch for patterns, not single moments. If your child has always been imaginative and is slowly outgrowing confusion, this is normal—even if it takes time. But if your child suddenly starts confusing fantasy and reality after doing fine before (especially after illness, a move, or loss), take a closer look. Sudden changes, confusion that lasts well past age 7 or 8, or beliefs that cause distress or interfere with daily life are good reasons to check in with your pediatrician.

Key Takeaway for Parents

If your child says Grandma turned into a dragon, they’re not lying or “losing touch”—they’re building brain systems that sort pretend from real. Most “fibs” are examples of imagination, magical thinking, or a memory gap; true lying is rare and comes later. Neurodivergent kids build these skills on a different timeline, not a worse one. Curiosity—not correction—helps most: join the story, calm the body before using logic, and focus only on sudden or out-of-character changes. This approach supports your child’s growing reality-testing skills and strengthens your relationship far more than any lecture.

Sources

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Get real: Orbitofrontal cortex mediates the ability to sense reality in early adolescents. PMC. pmc.ncbi.nlm.nih.gov

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