As a parent, I've always operated on the idea "if they ask it...they can understand the answer." (Obviously some details should be left out).
I had a young child ask me "why do (I) look like a girl when I'm a man?" His mom and aunt were all-a-fluster with, "oh no sweetie, Beth is a woman!" etc...which I appreciate, but I also don't like making the child feel stupid. In my case, I asked why he thought I was a man, and was told, "you have a man's voice."
True...but I told him that sometimes a girl is born with a man's body, and if that happens we have to work with doctors to make my body right for me. I told him he's very smart for noticing I have a man's body, and for staying strong in what he saw.
After that, he never misgendered me and always referred to me as "Aunt Beth."
So you might take that and use that approach.