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Minimal pairs are an excellent way to increase both vocabulary and listening skills. This works for students who have some basic vocuabulary (grade 3 or 8 year olds are the youngest I've tried with) up to perhaps 12 or 13 year olds.
First make up a list of words that are minimal pairs and useful vocabulary: sip/ship, think/thank, she/see, bad/bed, smell/smile, mouth/mouse etc.
Then make up an action to go with each one. Teach them to the students along with the words.
For younger students just putting all the words in a hat and reading them out, with them doing the correct action is enough. For older students, put the words in sentences, so they can try and guess through the context. The more complicated excersize has been sucessful even for university students.
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