Developmental stages of lying in young children

All children lie.  But how do you address this area of concern in a developmentally appropriate manner?

 In toddlers and preschoolers they don't have a clear idea where truth begins and ends.  According to parents.com, toddlers are too young to be punished for lying, but parents can subtly begin to encourage truthfulness by reading age appropriate stories and having short conversations.  Use every opportunity to explain what a lie is and why it is bad.  At this age, often what looks like a lie is either a honest mistake or an effort to protect themselves or to mollify the adult.  In response to a lie, be firm and serious, and say "That sounds like you aren't telling the truth" or "Are you sure that's what happened?"  Make it clear that you are not taken in by the lies, but move on gracefully after listening to and gently correcting your child.  Avoid confronting the child further or digging for the truth unless the situation is serious and demands more attention.

Children ages 5-8 lie to test what they can get away with.  Maintaining the lies may still be difficult, even though they are becoming better at concealing them.  Talk openly to your children and continue reading stories about being honest and the repercussions of telling a lie.  Notice when a child is being honest and provide appropriate praise and positive feedback.  Most importantly, because school age children are keen observers, continue to be good role models for them.  

Children ages 9-12 are becoming more adept at maintaining lies and they are more sensitive to the repercussions of their actions.  They also may have strong feelings of guilt after lying.  Forthright and longer conversations about honesty are definitely necessary at this age. Children who have an established relationship with their parents, where they feel comfortable talking and disclosing information, are more likely to tell the truth, according to Parents.com.  You also need to realize that your children are not always going to tell the truth.  When lying does occur take a moment to think about what's behind the lying so you can respond appropriately.

Childrens books that address lying:
Lying up a storm by Julia Cook
The Berenstain Bears and the Truth by Jan and Stan Berenstain
Howard B. Wigglebottom and the Monkey on his back by Howard Binkow
A Children's Book about Lying by Joy Wilt Berry

Sources:
Parents.com
Psychcentral.com