modeller; The dilemma you faced was exacerbated by not having a religious basis to your life. It was answered by sandy (22:27 Wed 04 Sept) and by idiosyncracy (08:26 05th Sept) from a Christian perspective. A five year old should be well able to understand that everything begins, ends, and changes, a Buddhist may have explained (in simple terms) Karma and rebirth.
I have looked back through the thread, I may have missed something, but I don't think you have yet told us how in fact you replied to your grand- daughter's question.