schoolyard bullies - how do you educate your kids?

The sun has been shining in Vancouver all week and we've been enjoying every minute of it!  Today, I took the kids, plus their cousin, to a playground at a local elementary school to do a special project for Father's Day {will post details soon!}.

After we were done taking our project pictures, the kids played on the playground while I checked my emails.  Next thing I hear is Miss S calling me and whispering that some kid was swearing at their cousin {later on she told me he was swearing at both their cousin and Lil J.  I'm actually glad I didn't know that because I may have lost my shit}.  Then I hear the forbidden "F" word directed towards their cousin.  What?  Seriously?

I quickly walked over to the boys, stared down the two older boys that were causing trouble and said in my sternest voice,  "Watch your language".  They both looked at me and continued playing.  A minute later, the "bully" started saying stuff to Lil J's cousin again.  When the cousin didn't defend himself, Lil J turned around and called the bully a "poo-poo head".  That's some pretty choice words for a 3 1/2 year old!

Of course I was proud of Lil J for standing up for himself and his cousin, but I was also really sad to see bullying taking place at such a young age.  In fact, I was discussing this with another mom earlier today who told me that her daughter and another girl at preschool were BFF's and they wouldn't let any other girls play with them.  They had no problems playing with boys - they just wanted the girls to stay away.  Her mother told us that she was trying to explain to her daughter that it wasn't nice to be a "mean girl" and her daughter responded that "A" was her best friend and she only wanted to play with her.  Did I think that her mother was secretly proud that her daughter was the bully and not being bullied?  I got the sense that she kind of did but that she was also trying to make it right.

I'm hoping what I said to the "bullies" was the right thing to say.  In the moment, I was so furious that this boy was uttering a swear word around my child but I also know that Lil J has heard worse coming from the tv {which we immediately censor if it happens} and will hear worse once he's in elementary school.  We can't shield our kids from everything but we can try to educate them as best as we can.

Do you think I said the right thing to the bullies?  What would you have said or how would you have handled a bullying situation?