A 16-year-old girl charged with planning to send thousands of dollars to the Islamic State group has broken down in tears as she was denied bail in a Sydney children's court.

The Year 12 student, who cannot be identified, appeared in Parramatta Children's Court, after she and a suspected member of a Sydney terrorist cell, 20-year-old Milad Atai, were charged with financing terrorism.

The court was told the pair was arrested shortly after meeting at Guildford Park on Tuesday morning, where Atai allegedly handed her $5,000 in cash.

Prosecutors claim the girl was planning to ask an older woman to send the money to her relative, alleged terrorist Ahmed Merhi.

On Wednesday, the court heard the girl told Atai she had previously sent money to Syria via Lebanon and knew it would go to Islamic State.

Commonwealth prosecutor Imad Abdul-Karim opposed bail, arguing the charge was very serious and carried a maximum jail term of 25 years.

Defence lawyer Michael Pickin argued the girl had a good record and suffered from anxiety and depressive disorders that would be exacerbated in prison.

He said the prosecution's case relied heavily on inference.

Girl's mother and father in court

However, Magistrate Paula Russell disagreed.

"I am not of a view that the prosecution case is a weak one... on the contrary, it appears to be a strong one," she said.

"I have not been satisfied exceptional circumstances exist... In that case bail is refused."

As the magistrate handed down her decision, the accused looked at her mother and burst into tears.

When she appeared to ask to talk to her mother, who was also crying, she was led out of court.

Outside court, the girl's father said his daughter was innocent.

The case will return to court on May 19.