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Sometime after age six months, infants discover how to create pleasant sensations by touching parts of their bodies, including earlobes, hair, feet, and genitals. Self-stimulation (including stimulation of the genitals) occurs in normal infants.
There are no negative effects of masturbation from a medical point of view. At times, however, a child who is masturbating can look uncomfortable or ill. Some infants become flushed in the face or sweaty, or they cry. Masturbation can sometimes be mistaken for a seizure.
It may take a skilled observer to really tell the difference. One helpful approach, if you are concerned, is to give your child's physician a videotape showing the child's behavior.
Over time the infant begins to associate certain emotions and ideas with pleasurable sensations. If an infant who is rubbing her genitals is told "No! Don't do that! That's nasty!" she begins to associate that sensation with disapproval.
She may stop masturbating, although the physical urge will continue. It is not clear what the long-term effects are of punishing masturbation at this early stage. I would be concerned that harsh punishments during infancy could cause difficulties in adult sexual function later on.