The problem with time-out is that it doesn't work. Time-out teaches a child little about her behavior or how to act differently in the future. A time-out is supposed to give a child a chance to collect herself and reflect on her wrong-doings - but such reflection is a lot to expect of a child who is probably too overwhelmed by her own emotions to think clearly about her actions. Rather, the child is apt to focus on her feelings of frustration at not having her needs met, rejection at being sent away when she needed her parents' understanding, and anger at not being heard. And time-outs quickly become ineffective the older your child gets: Imagine telling a child who is almost as tall as you are to go sit in a chair in the corner.
Instead of being silenced and isolated in timeout, what a child needs most when she is out of control is a loving parent to hold her, listen to her, and allow her to release her pent-up emotions in a constructive way so that she may develop the ability to verbalize her feelings rather than to act out.
Buddhist monk Thich Nhat Hanh, author of Being Peace, suggests that each family have a small breathing room - a simple space with a cushion for each family member and perhaps a vase of flowers. When a child is agitated, rather than sending him to his room or time-out, you could take his hand and walk into the room to sit quietly together and just breathe. Parents could also use the breathing room when they need a time-out to calm down.
From Natural Family Living by Peggy O'Mara
Taking Time In by Dr. Dan Siegel