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Not everything is "pretend" but what you have identified is that all societal rules are participatory algorithms, and that includes money and laws. Money, or really wealth and value, are effectively resource allocation and prioritization algorithms. It's why the very idea of individuals, or even organizational entities largely decouple from societal benefit, having comparable allocative power to actual societal management structures is batshit absurd.

You should check out the book Sapiens: A Brief History of Humankind. Humans have this amazing ability to make up all sorts of crazy shit, but it has huge advantages in our ability to organize.

One on one, a chimp would easily beat up a human. Ten on ten, the chimps still have an advantage. But 200 on 200, humans would win no contest. Our ability to make shit up allows us to coordinate with huge numbers people that we don't even know, which is extraordinarily rare.

One could argue that since we are but merely very complicated, slow burning chemical reactions, that the very concept of "pretend" is pretend.

Countries, slut shaming, office hours, time zones, dress codes...

I strongly recommend Sapiens: a short story of humanity by Yuval Harari if you'd like to think about this a bit more, particulary his concept of 'myths'.

I'd guess that you'd find a summary of that chapter online without buying the whole book.

Sort of. Theres maybe something to things that naturally exist, whether we name them or not. We didnt create beavers in the same way we did money.

I'm in this boat with my kiddo, and like you I intend to give serious and honest answers for any questions (although occasionally I do say "I don't think you're quite ready for that topic yet", or I'll keep the details light and inform her of why).

It's been working out great, similar age to yours. She trusts me to give her real info no matter the topic (this is invaluable), she accepts when I tell her that she's probably not quite ready for XYZ, and the auxiliary benefit is that I'm forcing myself to get a bit more efficient even when I'm in --verbose mode.

ETA: we're also careful to tell her that we expect her to make her own opinions about everything and not just accept ours. That includes things like religious beliefs and politics when she decides to engage with those topics.

My kids are too young to ask questions, but I intend to do my best to give them good thorough answers, including doing my best to find out when I don't really know the answer.

Value is. Money isn't

If I steal a cheap pen, it's because I wanted a cheap pen. There's no deeper meaning to it. I'm not going to fence it for a fifteenth of a baguette at the bakery.

If I steal ten cents though, I break a much deeper taboo because money is by definition fungible. Why do I need the money, what am I going to use it for, and why didn't I empty the cash register while I was at it? These are all worryingly open questions.

Furthermore I reject the premise that stealing 10 cents is functionally equivalent to stealing a pen worth 10 cents; if anything, the premise that these are equivalent depends on a very debatable modern consumerist idea that commodities are perfectly interchangeable for money and/or the belief in a "rational actor" that has never existed outside of economics classes. Sure that may have been be valid if I was in charge of doing a bulk purchase of pens (and even then people aren't as rational as economists would like but I digress). These economics concepts are all too theoretical to apply to individual actors in everyday life.
That pen is "worthless" to my employer (at least in my mind) and simultaneously worth a lot to me; I wouldn't part with it for 10 cents or even 1 euro because that wouldn't be worth the inconvenience of not having a pen, or simply because the idea of someone wanting to buy something I own and didn't intend to sell is offensive to me.

I do agree with the basic premise that we treat money as special, but to me that's a natural and rational consequence of its fungible and abstract nature. It's much weirder to consider physical objects to be fungible IMO (even if it makes sense on an abstract level for commodities), and that's why the sentence "you'll own nothing and be happy" induces so much existential dread despite being based on theoretically sound economic principles. I don't care if it's actually cheaper or more resource efficient, I'm not buying a subscription to my woodworking tools or selling my house. I like the psychological safety of owning things.