Yes, I am pretty certain my son Dash believes Elmo, Cookie & Grover are real and that monsters really exist too! They say we should tell them social stories in order to explain the concept of "make-believe" and imagination & to convey metaphorical concepts too.

I had imaginary friends as a child. Of course I joke that I'm one taco short of a combination plate! My 4yr old probably thinks Elmo is real. I do my best to explain how things are done on tv to make them appear real.

My daughter has the whole band from Big Time Rush living in our house now. They travel with us everywhere as well. They've even got assigned seats in my car!