I caught my 12 year old son and his 13 year old cousin mastubating eachother

Never repremand in a negative way childeren despise the awkwardness fo sex and parents in the same conversation. Dont make them feel as though sex is a terrible thing as a child sexual exploration is completley natural and sometime believe it or not family is closest. Heres a genuine word of advice that can help. Talk to both of them seperatley. Tell your child that your not upset but that youd like for him/her to understand that she is related to that person and sometimes your body makes you feel a desperation that you can learn to control that shes still growing and her time will come and that you only hope theyll be comfortable enough to tell you when that time comes. Talk about protection birth control etc. As this is not only a mistake but that now is that time for the talk. Express your emotions at that age and how your hormones ran wild as well. Help them understand your method of control. With the relative same conversation leaving out the comfor of them telling you about their first time i know thwy are young it may seem to soon but this day and age parents commit the stupidty of sending their child out with a loaded gun. Prepare them for the real world be honest and dont panic or get upset let them ask you anything and respond without shock. This is your best form of protection im speqking from experience.

did you ever fool around with a friend , if so then why ask. if not then all boys do it, yes, its a normal thing to do at that age, you should have apologised and left them to it.

I'm a little confused about the panties. Is his cousin a girl?
It's quite common for guys his age to be doing that together so I suppose if all you have is a girl cousin she would have to do.
It sounds like they knew you wouldn't approve and I think that's all that's necessary. If he wants to talk about it later let him talk. I wouldn't be too rough on him about it.

My mother walked in on me and my cousins (boys) doing that. She came to my room to tell us it was time to eat and she said, supper's ready, closed the door and left. I never heard another word about it and boy was I thankful I didn't. If I'd had a girl cousin my age to spend time with we probably would have shared too.