If you wish to children to believe, tell them the truth. In all likelihood, they've figured it out anyway.
Thus, I told this to my daughters:
St Nicholas was the Bishop of Myra. He lived in the 4th Century. ("So, he lived when Jesus lived?" "Almost," I replied.)
Anyhow, he loved to give people things, not because they wanted the things, but because they needed them. ("So, not like televisions or PS3s or stuff like that?" "Nope." *thinks* "Dad needs a television." "So he says.")
Nevertheless, he had a knack for knowing what people needed. One day, he found a family with three daughters who were too poor to get married. ("Does it cost much to get married?" "If you're clever, no." *thinks* "Dad says Uncle Andy's wedding was too expensive." "He's right." *thinks some more* "Is it expensive to get divorced?" "Very much so. I don't recommend it." *thinks even more*. "Uncle Andy should have stayed single. He would have saved a lot of money." "So your Dad says.")
Well, these three maidens wanted to marry very much, but not without dowry. As these were very good young women, St Nicholas thought they deserved a better life.
So one night St Nicholas dropped some gold coins down the chimney where they fell into the shoes of the maidens. ("Why didn't he just give it to them?" "He wanted it to be a surprise." "Why?" "Sometimes it's not about the giver." "But we know who leaves the presents now. That's not a secret." "You're too clever, kid. Shaddup.")
And so it came to pass that when the maidens woke up the next morning, they discovered the gold in their shoes, but had no idea who'd left it for them. Thus they were able to get married. ("And live happily ever after?" "That's the hope, anyway." "Did St Nicholas give any money to the husbands?" "Nope." *thinks*. "You're right. They wouldn't have gotten married. They would have bought televisions instead." "Maybe you should tell your Uncle Andy that.")
And so since then, many, many people will dress up as St Nicholas and give gifts to good little children who deserve them. ("Like us?" *considers* "Talk to your father.")
("So, what are we getting for Christmas?" "How about you ask St Nicholas?" "Moooom!")
Because I told them that, my children will always believe in Santa Claus, and the magic will never go away. If I wish to bore them to sleep on Christmas Eve, I read them this.