I'm answering as someone who was involved in sex play as a child.
I feel that my experience is particularly useful in this discussion because it was fully benign (or so it seemed) and consensual. Struggling with the memory was complicated beyond what I can easily explain here. To begin with, I had lots of sexual thoughts through the ages of 4 to 12 and felt intense shame for it. My experience occurred when I was so young that I was actually able to deny that it ever happened, and told myself that I made it up... because I was a bad person, it just made sense to me that way. About a decade later on, the father of the other children involved went to prison for child molestation (I should stress this involved even more children). I confronted the others involved in my incident (now adults), and found out that indeed, it did happen and that I wasn't crazy, and that I was somewhat of a 2nd echo of the terror that an adult was causing to children.
We all obviously take this issue very seriously, but due to my own personal experience, I'm tempted to see it as much more than just "it's not sexual to them". There are several things that you need to consider.
- You're thinking about the child, but the child grows up some day. You you need to think about how this person will face those memories as they grow up.
- Even though it's not sexual to them, it probably leaves a big impression on them. Sex isn't just about sex, it's also about desires, curiosity, and a connection with another person. A young mind understands some of this, is very impressionable, and remembers such experiences well. This is why those memories can weigh on them heavily later in life (which could be harmless or terrible).
- Right or wrong, we don't consider consent to be the same thing with children, and they need to be taught this. You don't need to condemn it, but you should teach them to not repeat the behavior, especially with other children who they would might otherwise see as perfectly interested.
There was a book that came out fairly recently which is absolutely fantastic for people who've struggled with such memories in their life. If you want the really long answer to this question, I would suggest you read it.
The Trauma Myth: The Truth About the Sexual Abuse of Children - and Its Aftermath
To summarize, society's efforts to provide resources to victims of child rape and molestation have narrowed our picture of what we see as a victim. We've also narrowed the time frame on which we respond to it. We've equipped ourselves to deal with the proverbial pedophile stranger who goes after kids in the playground, even though most cases don't fit a profile even remotely close to that. The thrust of the book is that for most cases, the hard work of coping with childhood sexual trauma events often comes years afterwards as the individual learns how to correctly frame what happened, at which point they can feel all sorts of betrayal, shame, and other feelings.
This might sound unhelpful, but when my parents dumped a pile of sex-ed books from the public library in my lap it really didn't help me come to closure with what I was dealing with. It just intensified my feelings and didn't help me feel any less alone about it, but I think that sex-ed, in general, helps. Children at all ages need some form of sex-ed, and when you encounter such an event you're somewhat forced into it. The important things to communicate are:
- There is nothing wrong with whatever they feel or think. Other people have similar experiences.
- It's not okay to act on those feelings. It's not okay for anyone else to either. Above all, involving other people is not okay.
- They're going to hit puberty, and they're really going to have to deal with it then. There is a natural process of becoming and adult, and it involves a lot of confusing and frustrating feelings.
You have the opportunity to come from a space of understanding and empathy, not just about what your child is currently going through, but also about what they will confront in the future, which they don't know themselves. It might be a fairly trivial event and it might not be, but either way the child just needs someone to be there to show love understanding and acceptance.
The final thing to mention is that your relationship with the adults who spend time with your child's cousin might get complicated. It's important to mention it could be anyone who spends time that child who implanted these behaviors, or it could be none of them. Honestly, I would probably seek expert advice on this issue if I were you. I'm not an expert.