The best way to help students understand realistic fiction is to explain that while the story is fiction, meaning the author made the events up, all of the things that take place in the story can happen. A look at the characters can help a student decide if the story is realistic fiction or not. If the characters possess any qualities that cannot occur in real life, then the story is not realistic fiction. Vampires, werewolves, time travelers, and superheroes would not be characters that could occur in realistic fiction.
The plot is what happens and takes place in a story. The plot of a realistic fiction story has to be something that can truly happen. Any fantasy elements, space travel or magical and supernatural events cannot occur in realistic fiction. Characters in realistic fiction typically experience a plot that mirrors real life with events that are historically accurate.
The setting of a realistic fiction story does not have to be an actual place. For example, the author might make up a small town or city somewhere in the country that does not truly exist. But the setting must be a place that can exist in the real world, and would be possible for humans to travel to. Settings on other planets or in the future cannot occur in realistic fiction. A rabbit hole or wardrobe that characters enter and find an alternate world in are not settings that would be considered part of a realistic fiction story.
Typically, in a realistic fiction story, the characters face a problem or challenge that becomes the thrust of the story. How the characters overcome obstacles or deal with adversity is a common theme in realistic fiction. The challenges faced by the characters are things that can really happen, and are often the exact things that would be facing the readers in the intended audience. Often, the stories help readers deal with the issues they are facing in their own lives. Teenagers might read realistic fiction about unrequited love, middle schoolers might read fiction about how to fit in at school, and younger children might read books about divorce or moving to a new town.