"Excuse me? When?" I asked, astonished.

"When you're asleep," she replied -- and proceeded to describe how, early Saturday mornings, he'd slip a bra over his T-shirt and then jump on our mini-trampoline. She stuck to her tale so adamantly that later that day, I sheepishly asked my schoolteacher husband if he'd ever jokingly held one of my lacy underthings up to his chest (he hadn't).

We laughed, but I felt unsettled. Lying to avoid punishment or to get an extra piece of pie -- that I could understand. But Lillian was lying frequently, for kicks, and she'd never admit that a made-up story wasn't true. Should I insist on honesty, I wondered, lest she develop into a pathological liar? Or let it slide, to avoid crushing her creativity?

The latter, apparently: The experts I quizzed about Lillian's tale were unfazed. "There's nothing wrong with her telling it," says Michael Brody, M.D., a child psychiatrist in Potomac, Maryland. "Very young kids don't know the difference between truth and fiction."

In fact, this type of lying can be a sign of good things. "Preschoolers with higher IQ scores are more likely to lie," says Angela Crossman, Ph.D., associate professor of psychology at John Jay College of Criminal Justice in New York, who researched the subject. Early lying proficiency may also be linked with good social skills in adolescence.

Of course, not all kids' lies are trivial incidents you can just laugh off -- and you do want to raise a child who values honesty. Knowing the types of untruths kids tell at each stage, and why, can help you gently guide your own toward a level of truthfulness that's appropriate for his age.