Plan your fairy tale before you begin telling the story. A child may ask a lot of questions which may cause you to alter your fairy tale, but having a good plan in mind will help you tell your tale from beginning to end.
Give your story a clear beginning, middle and end. Begin with the background of the story. Next, go into an obstacle, like a mean dragon stealing all of a princess' toys. Next, go to the plan and resolution, such as how the princess planned to rescue all of her toys, and how she does it. End by talking about how happy the main character is at the end, which will conclude your story with a 'happily ever after' ending.
Incorporate the child's name into the fairy tale. For example, say, "A long, long time ago, there was a princess named Alexandra..." The child will love hearing his or her name in the story, and will use his or her imagination to pretend that he or she is the main character in your story.
Include the child's favorite things in the fairy tale. Talk about a child's best friend, or her favorite animal, like puppies or ponies. Or, pretend the child is in a Barbie world if she loves Barbies. Incorporate fun, everyday things into the story.
If there is a villain in your fairy tale, make it scary, but not something the child hates. For example, a scary fire breathing dragon is a better option than a giant hairy spider, if the child hates spiders.
Make your fairy tale silly but feasible. Of course, fairy tales aren't realistic, but you can make sure that the plot will work. For example, a fairy tale princess may have to save her friend from a land full of evil dragons. Even though there really are not towns full of evil dragons where you live, the story is feasible as a fairy tale.
Speak in voices when telling the story to a child. Speak in a high pitched voice for a bird, or a low, grumbling voice for an evil dragon. Don't be afraid to be silly - the child will appreciate it.
Finish your story with a happy ending. This is a fairy tale, after all. You want everything to end up happily ever after.