Wow... I think this is harder for the parent than it is for the child. I remember sitting in bed with my children while my husband ran outside to shake the jingle bells. The looks on my children's eyes... priceless! Especially the night it was raining and my husband Ho Ho WHOA'd as he slipped on the roof. I had to calm the children down and tell them that Santa was fine! (While trying my hardest not to laugh.)
I think every child is different. Some want to believe more than others. You know your child... you'll know if he/she is ready. (And if you're ready. LOL!) For me, when they began to question the existence... that's when I broke the news to them. But I didn't just tell them 'no'. I told them that I still believe in Santa Claus myself, but the way I believe in him is a little different than the way they believe him...
I told them the story of St. Nicholas, (you should look it up, it's fascinating), and that the Santa Claus they know was really him. I told them that parents everywhere keep the spirit of Santa Claus alive by carrying on with his traditions. That even though he is no longer with us, we carry the spirit of St. Nick inside us and pass it on to our children. I also told them that it's okay to believe in the spirit of Saint Nick, because he really did exist... but the Santas that they see on TV and the malls are just a symbol of that spirit... and that it's the parents that deliver the presents in his name, not the man in the suit.
I also told them that now that they know the truth, THEY were given the responsibility to carry on the tradition... and that when they are older they have to do the same for their children.
They seemed to like that. :D
Plus... when the realization dawned on them that Daddy was the one that slipped on the roof... they giggled like crazy! And they had made a vow NOT to tell their father that they knew about Santa... until the following year. AFTER he jingled the bells. Then, when he came in to ask if they heard from Santa... he was greeted with a 'Thanks, Dad!!!' :D