Personally, I was not brought up as a JW in my earliest years. The tooth fairy came. So did Santa Claus and the Easter Bunny. It did me no harm (I think). It never occurred to me to question their existence, simple-minded and credulous as I was. (Another "fairy" visited my sister upon request. Sometimes that "fairy" gave her my stuff. I didn't say a word, because I was already not the favorite, and didn't want to make it worse.)
In the fourth grade, our teacher told us that Santa Claus wasn't real. I told my younger sister. She's still angry with me that I told her.
Telling kids the truth is a very subjective, troublesome conundrum. My son-in-law was asked by my granddaughter when she was very young, if it was wrong to tell a lie. He tried to explain why it is sometimes hurtful to tell the whole truth (e.g., if someone is stalking someone, and the stalker asks if you've seen that person), and lived to regret it.
Once I was listening to Dr. Laura on the radio. A guy called in and said he, as the tooth fairy, mistakenly left a $20.00 bill under his son's pillow. He needed most of the money back, but didn't know how to ask for it. Dr. Laura advised him to get a gold pen and get someone with nice handwriting to write a note to the boy from the tooth fairy explaining that the tooth fairy had made a mistake and needed most of the money back for other kids who lost teeth.
No one can answer this question for you, I'm sorry to say. It's a judgment call.