In my experience, kids most often lie because there is an immediate pay-off for lying or they think there's one.
By payoffs I mean rewards or avoidance of real or perceived negative consequences. For example, A child may lie if a parent asks who "spilled this milk everywhere"? They may lie to avoid being punished.
If a child is playing a video game and is only allowed 20 minutes after homework, and a parent asks: "Are your 20 minutes nearly up?" A child whose already played for half an hour may lie and say: "No" because the short term pay off is continuing to play the video game.
As a child gets older, ideas about negative and positive consequences (right and wrong) come into play more and more) in keeping with what their parents, peers teach them. So, the motives for lying can become more abstract. But there are often negative and positive learning experiences that support those values and choices.
Yet many people are surprised to learn about how big a role immediate negative and positive consequences play in shaping and maintaining, in even the most complex adult behavior choices and emotional experiences.
I think the biggest reason is they don't want to get in trouble, and they figure if they can keep it hidden, there is no chance of getting in trouble, whereas they think they will definitely be in trouble if they confess.
When I was a kid, my main reason for lying is because I don't want to see my parent's disapproving look. Or I don't want them to get angry at me even though I knew that what I'm about to do is not bad. I think the reason why I lie to my parents is because I don't want to hurt or disappoint them. Parents always have this somewhat unreal expectations from their children and that makes them so difficult to talk to sometimes. They also have a set of rules that you cannot understand and when you deviate from it even though it isn't that bad, they get angry.
Like the other answers, I believe children lie so that they don't get into trouble. However, they need to be taught not to lie with good examples from the parents. A lot of children lie because that is what they see their parents doing. Example: When someone calls and they tell the child to tell them that they aren't home. If we want our children to be honest, we need to be sure that the example they see from us is honest also.
I think kids lie because they are scared of the reaction they'll get for telling the truth... My parents used to hit me around the head, hard... I remember breaking a glass one day... I told them it wasn't me as I didn't want to be hit, I hadn't done it on purpose, but as my stepdad says... "there's no such thing as accidents"
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