I"m not advising you to do what I did when my kids were that little, but I did stick with the truth when they lost pets; cats, turtles, fish, the bird, etc. I never lied to them about death.
I explained as easy as possible and said they were gone and not coming back because they died went to heaven. Nothing complicated, just that they were ok now again and nothing hurts anymore.
I would find a box, line it with tissue paper and let them see their pet laying in there, or atleast know the pet was in the box.
I dug the hole and set the box in it. And covered it up with dirt.
We had funerals in the yard all the time and pretty much made a big deal out of it. We each took turns and would say something nice about the pet that we loved over the grave. They would help in making a cross and writing the pet's name on it to place on the grave and everyone would get to say goodbye. We picked flowers, the whole thing and it was a big send off. We discussed about the big "ocean in heaven" for instance where the fish would be happy again and live.
I never did run right out and try to replace whatever was lost though.
There was usually a good period of waiting if I were to try to replace the lost one and I wanted them to understand that pets are not that "replaceable" in our hearts for better lack of the word, but I think you know what I mean.
I feel doing it this way, the kids realized that it wouldn't come back anymore, and by doing it like this, it did help when they lost their great-aunt, and grandmother and uncle.
