They should be allowed to enjoy this. And they won't trust us later in life when they're looking for guidance about sex. It's also important that kids know that bowel movements and urinating are normal and healthy functions. Talk about it the same way you talk about elbows and noses, fingers and toes. Always use the right names for sex organs.
Toddlers are curious about the bodies of their parents and other children.
This is a normal way for kids to find out differences and learn about their sexuality. You can choose to allow it or not. But it won't help to punish children for being normal. Most kids touch their sex organs for pleasure. Masturbation is very common during this time.