When we neutered and spayed our cats 2 years ago my kids were 6 and 4. I just explained that it was so they couldn't have kittens. When they said they wanted kittens I told them about all of the animals that needed homes because there were too many being born without homes to go to. I also explained that the animals have a better chance of having healthier lives if they have the surgeries.
My kids are now 8 & 6 and have asked if Baloo will be neutered. I said yes and it is in the contract I signed as well. They wanted to know why again so I showed them the animal shelter website for Ventura County and read how many animals have died there and then showed them how many were waiting for homes in the Los Angeles county shelters. They recently experienced our older cat being put to sleep so they understand how animals are put down, but I explained that Gillie was sick and the animals in the shelter most of the time get put down because it is over crowded.
I remember explaining that the shelter people weren't bad, it was just something they had to do to give the other animals constantly coming in chances as well, that is why it is important for people to neuter their pets so there hopefully will be less animals that end up in the shelter.
I just asked my son (8) why animals are neutered and he said "so puppies or kittens don't end up in the shelter and get killed."
My 6 year old said "so they don't have puppies and kittens all over and they might get stepped on."
As for knowing the birds and the bees, my kids know about "mating" from animal planet etc. I don't think they know about the private parts being used for "mating"
but they do understand that females have eggs and males have sperm. They did watch their silk moths mate and mate and mate recently, so as far as I know, they probably think you put your tushes together!
I am sure your kids will understand about the neutering. I would just tell them the truth, but you probably don't have to go into all the detail like I did.