When Kids Talk Back

How can you tell the difference between defiant behavior and a child who is simply trying to assert his independence? Keep in mind that the first signs of autonomy are a natural development at this age. When a preschooler says "You're stupid," it's usually in response to being chastised ("You can't hit your brother") or being given a directive he does not want to follow at that moment ("We have to get ready to go now").
Don't overreact. "Do you want to win the 'battle' or change the behavior?" asks Cynthia Whitham, associate director of the Parent Training Program at the University of California at Los Angeles. If your child yells "You're a dummy!" and runs out of the room when you ask her to turn off the TV, you should let your child know such language is not acceptable, but do not dwell on it. "This isn't about winning," says Whitham. "You just want to stop the behavior." Ignoring negative behavior after a brief, but firm, reminder that your child's words hurt your feelings can have more impact than starting a prolonged battle of wills.
Think creatively. When Chris Stout, Ph.D., chief of psychological services at the Illinois Department of Human Services in Chicago, was selecting clothes for his son, the 4-year-old said "I hate those" when he looked at the pants. "I asked why," Dr. Stout recalls, "and he told me, 'I only like pants with pockets.' Since there weren't any clean ones, I suggested he wear a fanny pack or backpack and pretend that he had pockets." The idea refocused his son's attention on finding a solution and also let him know that his dad took his concerns seriously. "When your child can't have his way," Dr. Stout advises, "ask yourself, how can we problem-solve around this?" Take immediate action and follow up later. Children are entitled to their opinions but they're not entitled to trample on other people's feelings.
Parents.com