The Shepherd's Press Blog has a good post on "Why Children Lie."
So when you hear your children lie, remember that one of the elements behind the lie is fear—fear of being exposed for who they really are. The answer, of course, is Christ. Even in the midst of hearing their lies, you can have compassion for your children. Yes, they are sinful, unkind, and even cruel with their lies. But at the root is a heart in need of Christ. Without Christ, fear dominates. Fear can make one stupidly deny the truth, just as Sarah did.Read Part 1 here and Part 2 here.
When your children lie, or even when you think they may have lied, you always want to remind them that God knows their hearts and thoughts even better than they do themselves. You want to call them to repent and trust in Christ, for he alone can help them overcome the fear of self-exposure. Only the power of the Gospel can free them from the tyranny of lying. You can and should confidently tell them that God knows whether they have been truthful or not. Discipline for lying must come from compassion for a lost heart. Yes, your children have offended you with their lies, but more importantly, they have offended and mocked God. Help them to see this reality. It is sometimes difficult to realize that a child who is defiant and seemingly unfazed by lying may actually be dominated by fear. Yet this is often the case.
God save me from moralistic parenting! I've got a long way to go.