Dr. Greene`s Answer:
Some self-exploration is normal and healthy for girls and boys alike. Usually it is the pleasurable sensation they are enjoying, not some sexual fantasy. We get concerned if kids are doing it in public or if it becomes something that seems to consume them–if it gets in the way of other healthy activities.
Usually the best way to handle it is to explain that this is a private thing–like going to the bathroom. Usually bribing isn’t necessary or best. Discouraging them from doing it at all usually makes it more desirable and it’s not something you can control. The best way to lessen the habit is to distract them or substitute a fun activity without even mentioning it. If it seems to be increasing, it is worth considering whether she might be under extra stress from something and she is using self-exploration as a form of relaxation. It can be a self-comforting behavior, much like thumb sucking. Many parents feel that their kids are the only ones doing this, but most kids do it.