No, OP is correct. I was teaching CS at a uni two years ago... files, directories, filesystem hierarchy, but yes, even just a file, this is a strange concept to them.

It is not a insurmountable hurdle, but it is interesting in the sense that things like git, programming, etc, all deal with files and filesystem hierarchies, and the students have never seen this, so it makes it one more thing to add to the (ever growing) list of things they need to know before we jump in.