Young children, below the age of four usually lie to avoid punishment. But between the ages of three-and-a-half and four-and-a-half, they learn to lie with sophistication and skill. They are getting successful at understanding what the truth is, and yet think of an alternative story that would make sense and be believed by a hearer. They are becoming good jugglers - with the truth and their lies!
Delighted at their own skills they indulge in their stories all the more. But once they get to know the threat their lying invites in loss of credibility and popularity among their peers and with their teachers, the habit of lying instinctively wanes off.
It is only when a child continues to lie persistently, even at an older age, it should cause concern, as it signals a deep-rooted problem that may persist into adulthood.
Source: Medindia