Why did God make the first covenant when he knew he was going to replace it?

The old covenant was to show us our sins. The Bible says in Romans 7:7, "What shall we say then? Is the law sin? God forbid. Nay, I had not known sin, but by the law: for I had not known lust, except the law had said, Thou shalt not covet." God knew in His wisdom that we needed to fully understand our inability to reach God by our own efforts. So He sent us the old covenant to show us that. No man is able to keep the old covenant perfectly, except Jesus. Galatians 5:24-25 says,"Wherefore the law was our schoolmaster to bring us unto Christ, that we might be justified by faith. But after that faith is come, we are no longer under a schoolmaster."

God, in His wisdom, knew we would never see that we cannot save ourselves, unless we saw just how sinful we really are. No man is able to obey perfectly every law of the old covenant. But we needed to learn that, so we would see our need for Jesus. Many things in the old covenant are a "type," or a picture, of things in the new covenant. In the old covenant they had to sacrifice an unblemished lamb for their sins. Jesus came as the Lamb of God, to take away our sins.