One other thought. I pray for dead non-Catholics the same way I pray for living ones. Prayer is outside of time. You can pray that they receive the grace of conversion at the moment of their death. You can pray this hours, days, years, even centuries after their death.

You'll think I'm nuts, but I pray for Pontius Pilate, the poorest slob this world has ever known. Talk about a victim of circuмstances. How many of us would have stood up to that onslaught of persecution? Yes, Pilate was persecuted by the Jews. And we know that his wife was touched by grace. Even our Lord encouraged him by telling him his sin was not as great as that of the Jews.

I have deep, deep sympathy for Pilate, my countryman. I pray for him, that he repents and confesses the truth before he closes his eyes. I read once on Traditio that he is venerated as a Saint in the East. That gave me much happiness. 

Now, none of this is mental fodder for an 8 year old. All he requires for now is that it is a good and holy thing to pray for the dead. When he is older, he will be ready for distinctions and subtleties enough.

He is certainly old enough now to be taught a prayer or two in Latin, and how to practice daily devotions for the Poor Souls. So, you can focus on amping his praxis. 

Pax!

It is quite simple. The OP is a layperson speaking to a child, not a bishop addressing his faithful. There is no need to make a treatise on it. And the issue is certainly about "wasting" prayer.
Unless the OP has been charged with the child's religious formation, s/he really ought to refrain from commenting of the eternal fate of his grandfather, but he should be encouraged to pray for him regardless. If anything is to be said, it should be expressed in general terms rather than personal terms. Why introduce a child to one's own scruples. Obviously it is not a question of religious indifference on the part of the OP.

Well.......anything I say in this reply should not be taken as me arguing a position, because I am merely revealing the movements of my own soul, which, I am sure, is full of illusions.

I don't know what a vessel of destruction is. I've never heard that term before. Of course the term vessel of election was used by our Lord himself, referring to St. Paul. I searched the term 'vessel of destruction' in the Douay, and nothing came up.

I think I have heard it said somewhere in the past that Pilate's wife's visions were from the devil, but that is not determinative for me; it would not change my desire to pray for him.

1. The very first demonic vision came to Eve. She was tricked by it, and sinned against herself and her husband because of it. But in the Exsultet we hear the Church pray, O Happy Fault!

2. All demonic visions are permitted by God to bring about God's own purposes.

3. Peter was certainly being guided by the devil when he suggested to our Lord that He should not go to Jerusalem if that meant His Death. Jesus rebuked him, calling him satan. And yet, consider the grace and instruction that has flowed down to Christians throughout two centuries, as a direct result of the Apostle's temptation.

4. We are often instructed more by temptations - ours and those of others - than by clear acts of virtue.

5. Everything the devil did on Good Friday boomeranged on him, slapped him in the face, increased his humiliation, and lowered his position in Hell. From the standpoint of his soul, Pilate's wife's dream served as a warning to him. It provided him with a kind of light - the devils can tell the truth for nefarious reasons. It was, in fact, a grace that commenced a terrible and grave struggle in Pilate's poor miserable soul. Fr. Groenings has far less sympathy for Pilate than I do. He found him a nasty, prideful profligate. I side more with Jesus, Who loved Pilate. Jesus loved him. Jesus, in that short span, gave Pilate a lifetime of instruction.

Pilate failed in his first test, but so did Peter and the Apostles.

6. What is a vessel of destruction? We don't believe in Calvinistic predestination. We believe in the hope of God's mercy for the worst sinners. What is it? 

What if God, willing to shew his wrath, and to make his power known, endured with much patience vessels of wrath, fitted for destruction,
[Romans 9:22]

Op here, i will add that I am quite scrupulous and that bis mothers side is Catholic (novus ordo) and fathers side is eastern orthodox.