Yes, Im afraid that this distressing symptom is very normal.
People with dementia often live in a previous time period and think that people who have died are still alive.
I would guess that your mum is living in a time period when she was a child when she says that. BTW, the time period that they are living in often constantly shifts - even within a space of a few minutes, which can be very confusing foe every one.
Dont try to correct her. If you tell her that her parents have died she will probably be very distressed. You cant bring her back to your world, you have to talk to her as if what she thinks is the truth. I used to make non-committal noises like "thats nice", or tell her that her dad was at work when she wanted to go and see him.