As I understand it, the ability to understand abstract concepts develops gradually in kids and is certainly not all there when they first start having conversations. This comes into play when kids learn about God, who figures in all of the Parsha stories, deserves thanks for all of our food, etc., but can't be directly apprehended.
In most other situations, we have words we teach kids to use for entities they hear about in stories that can't be seen or touched, such as "imaginary" or "pretend."
As a result, more than once, when God has come up in conversation, my 4-year-old has offhandedly pointed out that "God's not real," or "not a real person."
How does one explain to a small child the distinction between God and (lehavdil) imaginary things in stories?