Q: What if my child masturbates?
A:Masturbation is normal, and most children fondle their genitals. Don't make your child feel guilty about being interested in his or her own body. However, by age four, a parent can help a child understand that this is a private behavior -- "It's OK in your room, but not in the grocery store."
This link is full of win.
http://extension.missouri.edu/xplor/hesguide/humanrel/gh6002.htm