Selective binding of ions to biomolecules plays a vital role in numerous biological processes. To understand the specific role of induced effects in selective ion binding, we use quantum chemical and pairwise-additive force-field simulations to study Na+ and K+ binding to various small molecules representative of ion binding functional groups in biomolecules. These studies indicate that electronic polarization significantly contributes to both absolute and relative ion-binding affinities. Furthermore, this contribution depends on both the number and the specific chemistries of the coordinating molecules, thus highlighting the complexity of ion-ligand interactions. Specifically, multibody interactions reduce as well as enhance the dipole moments of the ion-coordinating molecules, thereby affecting observables like coordination number distributions of ions. The differential polarization induced in molecules coordinating these two equivalently charged, but different-sized, ions also depends upon the number of coordinating molecules, showing the importance of multibody effects in distinguishing these ions thermodynamically. Because even small differences in ionic radii (0.4 Å for Na+ and K+) produce differential polarization trends critical to distinguishing ions thermodynamically, it is likely that polarization plays an important role in thermodynamically distinguishing other ions and charged chemical and biological functional groups.