As a parent, we can discern the difference between a lie and imaginative role-playing or story-telling. A lie, by definition, is an untruth with the intent to deceive. Most young children (our 5 year old, for example), make up wild stories about what they do during the day. “I saw a giant purple elephant!” well, it is untrue, but in their mind it probably isn’t! They SAW that purple elephant, or a worst they want to share a fantasy with mommy or daddy.
Where it’s a problem is when they’re caught doing something they’re not supposed to be doing, and they purposely tell and untruth to deceive and escape guilt or reprimand. That is a lie.
Examples:
Telling daddy she swung so high on the swing at school she jumped over the moon isn’t a lie. It’s a childish fantasy.
Telling daddy her friend broke her toy when, in fact, she broke it herself is a lie and should be appropriately addressed.
Take this at face value. I’m a Christian and a parent. I’m not a priest or a child psychologist.