One of the hardest parts about being a parent is knowing when to panic, and when not to.
So let me put parents at ease in this situation: generally when a child masturbates, no parental freaking out is required. Children as young as 18 months old masturbate, and it is a natural behavior –for both boys and girls - that physicians will tell you generally causes no harm. It is common and frequent in young children, particularly as they become preschool age and have more control of their motor movements and are more conscious about knowing what they like and what feels good. The frequency of this behavior tends to decline as children enter elementary school, and then increases again during puberty. Children tend to masturbate because it feels good or they are exploring their bodies, neither of which is a cause for concern (however, if the child appears to be touching himself because of physical discomfort or is displaying other symptoms of possible medical problems, a parent should consult with the child’s physician; if the behavior is so frequent that it is interfering in the child’s life, the parent may also wish to seek professional help).
I don’t care how tough and brave you are: talking to your child about sex and body parts is one of those things that just turns parents into jelly-legged wet noodles. But it is an important thing to do. First, keep in mind that teaching about sex is something that is best done on an ongoing basis. Talking about sex on an ongoing basis allows you to convey information in little pieces at a time, which not only helps your child to learn better but also allows both you and she to get used to talking about it (and it sends the message that it is alright to talk about it).
Parents should start by talking about the different parts of the body, making sure to use anatomically correct names instead of pseudonyms, in order to show that there is nothing wrong with these parts of the body and that it is alright to talk about them. Having ongoing open communication about sex and the body also allows your child to feel comfortable talking to you about these topics, so she won’t feel the need to get the information from others (who may not give the correct information or the values that you would like conveyed). As a child gets older, you would discuss more and more information, using your child’s level of development and interest as a guide. Make sure as a child gets older you talk not only about the physical aspects of sex, but also the emotional components, as well as issues about your values, diseases and consequences, relationships, and birth control options. Parents may want to get one of the many very good books about talking to kids about sex, such as the book It’s Perfectly Normal by Robie H. Harris, to guide them through the process.
With respect to masturbation, explain to your child that her body is hers, and that it is alright to do things that make our bodies feel good: we go swimming on a hot summer day, we eat when we are hungry, and it is alright to touch yourself if it feels good. It is something that she should do in private, and you can tell her when and where this would be.