I would suggest the last two posts are inaccurate.
Masturbation, at pretty much any age is normal, and not something to get concerned about unless the "habit" starts to interfere with other aspects of normal life.
What is not so normal is the displayed lack of agreed boundaries. Her saying "I was here first" is an example of the tail wagging the dog.
When telling a child what is acceptable (and not), offer the reasoning appropriate for the age, and make it clear that behaviour "X" is not tolerated, behaviour "a" is, behaviour "x" (this one) is, but only in private areas (bedroom, or bathroom...you decide.)
This is getting slightly OT, but it is broadly related to the question.
I think it's important to not make a big deal about the masturbation, but breach of discipline, once "let go", can turn into a nightmare problem.
Learn to separate these areas, but spot when they overlap, and learn the appropriate disciplinary techniques (which absolutely should not include hitting, etc, but may include things like "time out", progressive loss of privileges etc.)
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