ok, so how do you balance this with not creating sexual neurosis in your kids? I want my kids to have a healthy attitude about their bodies, to have the respect and self-awareness to explore their sexuality as they see fit, at whatever age they are ready and wanting to do that, with a partner they trust and love (in some sense or another), because I don't think it is realistic to expect a human creature to wait until marriage to want to explore their sexuality. Not realistic, and not even desirable, in my opinion.
We're freely nudie in our house, and when the kids were little and grabbed dad's penis in the bath, he just explained that it was his penis and he didn't want them touching it. In our house we say that each person gets to decide who touches their genitals -- but what if they don't mind their sibling touching it? when they're little there is a lot of curiosity and exploration, and it is normal for a little girl to want to see what a penis feels like, and if her brother doesn't mind her poking it to check it out, I don't think that's a big deal. Personally, because it sort of bothers ME to see it, I would then move them on to some other activity, nonchalantly and without shame.
I also wanted to mention the importance of using the words "penis", "vagina", "vulva", "clitoris", "anus", etc, etc, because that will eliminate the danger of them saying something innocent and having it taken in the wrong way. A relative of a friend of mine's family went through hell because her daughter said her grandpa touched her underwear (she was about 2/3, and he did a lot of her care, so through bathing and toilet things I imagine touching her underwear was a major part of his day) and the mom freaked out, grandpa (step, actually) was really hurt and denied it, nobody really knows if anything happened or not, and this poor little girl was likely left with a lot of confusion, whether something happened or not. If your child knows to call it an anus or a penis or a vagina, there is no confusion. saying "your bottom" is so confusing -- what if they are taught that nobody should be touching their bottom, and someone carries them or gives them a piggyback ride, or they sit on someone's lap, or someone affectionately pats their bum?? so much room for misunderstanding!!
I haven't read it, but Gavin DeBecker's book "Protecting the Gift" talks about all of this and comes highly recommended by lots of people.