making up stories

My 7 year old granddaughter makes up stories. She went on a walk with her grandpop and when we got back I asked how it went. I asked her if she saw the fox in the meadow. She was so excited said Oh yes I saw the fox.  I asked her if it was a red fox. Again excited and said yes he was a red fox.
Later I told my husband how she loved the walk with him and she was excited about the fox and he laughed and said No there wasn't any fox. She was so excited through the story and very convincing that I had no doubt to not believe her. She really enjoyed herself.
When she was younger we thought she was having a hard time distinguishing between her dreams and reality but she will be 8 in a couple of weeks and I am worried. Her dad and mom doesn't like it when she does this and disiplines her. I would like to understand this and try to help her.
Any suggestions?
Cathy

[margypops]

I think children make up stories a lot , she maybe thought she could get some extra attention by telling it, perhaps she and her Granpa had been talking about nature and animals and it fed her imagination. Children often have ;imaginary' firends I shouldnt be concerned, how do her parents discipline her ,if you are worried it would be an idea to ask a counselor her opinion.