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This is a technique generally used when remembering numbers, although the idea can be used for remembering other things as well. It is based on the idea that short-term memory is limited in the number of things that can be contained. A common rule is that a person can remember 7 (plus or minus 2) "items" in short-term memory. In other words, people can remember between 5 and 9 things at one time. You may notice that local telephone numbers have 7 digits. This is convenient because it is the average amount of numbers that a person can keep in his or her mind at one time.
When you use "chunking" to remember, you decrease the number of items you are holding in memory by increasing the size of each item. In remembering the number string 64831996, you could try to remember each number individually, or you could try thinking about the string as 64 83 19 96 (creating "chunks" of numbers). This breaks the group into a smaller number of "chunks." Instead of remembering 8 individual numbers, you are remembering four larger numbers. This is particularly helpful when you form "chunks" that are meaningful or familiar to you (in this case, the last four numbers in the series are "1996," which can easily be remembered as one chunk of information).
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