At this stage, your child’s creativity is developing so much that sometimes he may think that what he believes is the truth. It may seem counterproductive; after all, you don't want to encourage lies, but the best way to handle this is, to relax and enjoy your child's tall tales.
What you need to know:
Highly embroidered fantasies are generally harmless and part of your 2 year old’s normal development. After all, you read fairy tales to your child. Why shouldn't your child offer some of his own? Until he is 3 or 4, your child isn't really able to distinguish between reality and fantasy. It is impossible for your 2-3 year old to grasp the concepts of lying and telling the truth. Imaginary friends are normal for your kid. Pretend pals are normal and a signal for your child's well-developed imagination. Even when your child blames a misdeed on his 'friend' there is nothing to worry about. From an emotional viewpoint, imaginary friends serve an important purpose: it gives your child a safe way to find out who he wants to be. And that his friend is also there to take the blame for the spilt milk on the floor.