They will see and understand even if you hope they will not notice. Be aware that if you don't say anything, and you never say anything to your kid, that in itself is a message. You might think you're not saying anything because you're waiting until the kid is ready, old enough, or asks a question. But the kid might well be thinking, I'd ask, but maybe I'm not supposed ask about this. Or worse still, if the child brings it up and you get upset or angry, the child will feel that he has done something wrong because he has upset you.
Younger children accept answers at face value.
He was puzzled. He was clearly forbidden as a member of our family to ride on Shabbat , but he saw that we loved and respected people that did, hence the question. Thus was added another ambiguity to his repertoire of things that were less than absolute. Children, quite young ones, and certainly children in elementary school, already know an awful lot more about sex and sexual orientation than we give them credit for. What they want and need to hear from their parents is how to think about and make sense of what they know.