Let's say you have a file named template.txt that contains the following.

Line One
Hello $name
Line Three

Here is how you could create a new file (foo.txt in this example) and replace $name with a value (John Doe in this example).

#!/usr/bin/python3
from string import Template

new_file = open("bar.txt", "w")

with open("template.txt", "r") as file:
  for line in file.read().splitlines():
    t = Template(line)
    adjusted_line = t.substitute({'name': 'John Doe'})

    new_file.write(f"{adjusted_line}\n")

new_file.close()