One of the most important things that a parent can do about the "Gender Conversation" is to check in with themselves first.  What I mean by this is to try to consider the "heteronormative" assumptions that you might practice and the unconscious and subtle ways that you might foist something on a child based on their appearance or sex assigned at birth.  There were early studies about how individuals would engage in more hands on/action-oriented play if a baby was dressed in blue, for instance (regardless of whether it was born with male genitalia or not), and more cooperative/pretend play (e.g. offering up a doll) if the baby was in pink (regardless of whether it was born with female genitalia or not).  We might ask ourselves, "How do I identify?"  "What are my pronouns?"  "How might I react if my child's gender identity were different than what I thought it to be?"  "Have I ever discouraged my child's choice or preferences about something (e.g. clothing) based on my assumptions about my child's identity?"  These are all important questions to consider before having any conversation with a child.  Once you feel that you can come at it in a totally neutral and unbiased way THEN it's time to have that conversation!  

As with any topic it's important to consider where your child is developmentally, not just chronologically, but also from a maturational standpoint.  Some children are more mature and better-equipped to process certain information.  Others might be more reactive and make a mockery or joke about the content, suggesting some emotional immaturity and perhaps discomfort with the topic. Keep in mind that they often know or are at least aware of more than we think they are.  If it all possible we as parents want to ensure that they feel like they can come to us and get good information.  To that end we want to promote their curiosity in a judgment-free zone.  If they are joking about it, try to encourage some empathy about why that might be hurtful to other kids who are different from them.   You might connect them to a time when they felt different or left out to further encourage an empathic understanding of the concept of being ostracized and "othered."  

You might talk about how we are born with biological traits that are male or female - the penis and vagina (they know!), but sometimes a person just happens to feel differently from their biology.  If they are born with male parts they might identify with more feminine qualities, if they have female parts they might identify with more traditionally masculine qualities, OR they might identify as "non-binary," meaning that they could have traits of both and don't identify in one particular way.  The masculine and feminine qualities might relate to how they style their hair, what they wear, how they speak, and what kind of activities they enjoy.  We can explain that this can get confusing to others who do not think as they do.  Others might feel threatened or confused by such differences.  

Here is a great opportunity to remind our children that our differences are actually what make us interesting and are something to celebrate and we all want to do our part to create an inclusive society where everybody can be who they are without shame.  We can say that a big part of how we can help these individuals is by asking for their pronouns and addressing them in accordance to their preference.  We can also stand up to bullying/harassing behavior and report it to responsible adults, showing our gender-diverse friends that they are loved and respected and not alone as we stand with them as allies.  

Of course, keep the channels of inquiry open, asking them if they have any questions and see where it goes!