Reference: Fataawa Noor ‘alad-Darb – Question No.6396, Page 230, Volume 12
Question: I narrate fictitious stories to children, and that is to encourage them to pray and be truthful, and all good things [in general]; so is this considered to be lies? [Bearing in mind] they are children, and are unaware, and don’t understand [these are fictitious stories].
Response: If these stories are real stories, then there is no harm [in narrating them]. If, however, they are not real stories and attribute such-and-such to a certain person – that which is not true, then this is not permissible because it is a lie.