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Kids at this age (5 years) are best dealt with being CONSISTENT about the punishments. Kids this age depend on familiar routines and structure, and that applies to understanding your expectations for their behavior. A child gets confused when a behavior that warrants a time-out one day gets a quick "Stop that!" the next. The best way to reinforce the rules is to apply them reliably.
By age 5, your child is big enough and strong enough, and should be able to follow basic rules.
Hence after appropriately warning her of the consequences of hitting her sib (which is actually a sign of sibling rivalry)
she needs to be given a 'time out' to discipline her as needed
On the other hand, you need to manage the issue of sibling rivalry too
so spend sometime with the elder one "alone"
Also try to involve her in the care of the younger one - for example helping in getting her nappy to you,
helping choose the color of her dresses
Once she feels responsible for the younger one, she is likely to start enjoying her company
Right now, she sees the younger one as a threat since the ounger one obviously needs a lot more attention, and gets it
Try to keep some gifts in the house, that you can pass on to visiting friends / relatives if they forget to bring any gifts for the elder one, so she does not feel neglected
While you need to be clear and consistent in enforcing discipline
once the disciplining is over, you need to give her attention too, and make sure that she has at least some quality time with both parents
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