Children, do remember such events for quite a long time. I am conveying this information since me and my wife are very close to each other and discuss such issues.
I personally do remember an instance when I was 5 years old having seen a female taking bath. I am now 40 years old and I can still visualize the intricate details I had seen.
This event did have negative effects in my life - I had developed an indiscriminate inclination in sexual matters in private but felt shy even if a lady older than me by 20 years would meet me.
Luckily I did not turn out be a psycho, rapist etc…
By 20 I had developed passion for sex with older girls... But had no courage to speak to any girl or lady (even my teacher) because my immediate attention that grabbed me was her bosom.
Even many of my friends had similar incidents in their childhood days which they remember in details (whereas they do not even remember the names of subjects they had completed in their undergraduate course)
Well! It does have some effects and leave questions in the mind of children and these will get addressed only when they get to the right age.
My advice to you is avoid further such incidents - try to keep your child busy for a few months with something else -- Do constantly monitor your child’s inclination and interests and try to erase the marks as soon as possible before it stains.
And please, henceforth, do not try to make some one a nuclear scientist before even completion of formal education.
Cheers! Enjoy and the next time either of you get hot - remember what displayed on packaged glassware - Fragile. Handle with care.
DITTI