These days you find online retailers that caters specifically to kids. In fact companies are known to spend heavily on ads and marketing targeting kids. We know that kids below the age of 18 are not allowed to have their own independent account but they can jointly have an account with the guardian. This also means once they have internet banking access they can pay for purchases online.

Unless they are guided properly we can well imagine how they risky this can be. Kids naturally have less control over their desires and hence their spendings can go out of control easily. Besides this, they can end up revealing too much sensitive information online while shopping and hence putting themselves and the whole family at risks.

Hence this becomes one of the issues surrounding internet safety for kids today, which you as a parent need to know more about. Presented below a detailed study into kids and online commerce, the harmful effects and the risks, and important tips for safety.

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Definition & Background

Kids and Online Commerce refers to any situation where children make monetary transactions online.  This includes purchasing items off Craigslist.com (which may not require a bank account), selling or auctioning items, using a credit or debit card to buy items from online sellers or retailers, and participating in online sites requiring payment (including gambling websites).  In order to shop online, one must have access to a computer and either a bank account, online payment account, debit card, or credit card.

By law, one must be at least 18 years old to have his or her own credit card.  However, those under 18 can be added as a user to an adult’s account.  PayPal offers a service to enable teens to have their own accounts under adult supervision as well.

Online Banking is another facet of e-commerce, enabling simplified access between accounts, the ability to manage investment portfolios (which rarely applies to children) and visibility into most non-cash monetary transactions.

Data & Research

According to a report entitled “The Teens Market in the U.S.” teen shopping grows by approximately 3.5% annually and is forecast to climb to $91.1 billion in 2011. [1]

WeeWorld, a popular avatar video game, conducted a survey and found that “when it comes to spending online, 34% of teens are willing to spend online for ‘anything fun’ while 22% will spend online in order to express themselves. Girls are generally more interested in buying goods online to express themselves, 24% as opposed to 17% of boys.” [2]

Market researchers conduct studies on the buying habits of kids and teens. ClickZ, a website made for digital marketers, also provides information and statistics about online commerce.

Similarities & Differences to Offline Behavior

Kids and young adults are heavily targeted by marketers and often seek to purchase toys and objects they perceive to be important to their personal and social development.  Online marketing can be narrowly targeted, and thus be more effective.  Search engines and online vendors will remember prior purchases, or simply what one has searched for.

The primary difference between buying something online and from a paper catalog is the ease of use and the threat of identity theft, which can quickly lead to a weakened credit score and.  Making purchases online can be quick and easy because software, online stores, and PayPal save credit card and billing information.  Whereas prior to online commerce, a child could sneak a twenty dollar bill out of a parent’s wallet when no one was looking, today a child can memorize credit card information and use it without being asked for identification.

In addition to now being able to buy everything online that one previously bought offline, there are a number of items sold online that do not exist offline, thus increasing the number of ways youth can spend money.  These items include domain names (eg. yourname.com), membership to video game sites (e.g. Club Penguin), access to premium content on a website, and virtual goods (e.g. many social networks and online games allow you to buy enhancements, customizations, and virtual gifts).  Prescription drugs can also be more easily purchased online, as a prescription is often not necessarily required if sold through an international pharmacy.

Just as it makes purchasing easier, the Internet also facilitates the act of selling, which can foster both productive and unproductive behavior.  It’s as easy for a teen (perhaps even easier) to navigate eBay.com, Etsy.com, or Craigslist.org as it is for their parents.  Children might be encouraged to develop entrepreneurial skills, even selling goods or services from their own websites.  Other ways kids and teens might make money online include gold mining (obtaining and selling virtual weapons and currency in video games), selling advertisement space on blogs, or as a creative twist, using YouTube to help sell Girl Scout cookies. [3]

Harmful Effects

The most harmful effects with regard to online commerce are overspending, getting scammed, damaging the card holder’s credit score, and breaking the law by purchasing prohibited items.

One example of online fraud is phishing: the criminally fraudulent process of attempting to acquire sensitive information such as usernames, passwords and credit card details by masquerading as a trustworthy entity in an electronic communication.  Some laws are easily transgressed online, such as lying about one’s age to gain access to a site, using someone else’s credit card, and illegally downloading music, movies, or software.

E-commerce also opens opportunities for kids to communicate with and meet strangers.

Recognizing the Abuse of Online Commerce

How each family discusses managing money is a personal decision, but those conversations should address issues specific to the Internet.  Familiar problems like overspending are joined by new ones like identity theft and Internet scams.  Parents should stay abreast of topics as they arise in the news and in the lives of their children.

In the case of illegal downloading, Internet service providers might contact the account holder if they have been alerted that illegal file sharing has occurred.

Tips for Safe Online Commerce

• Be vigilant for unauthorized credit card use and identity theft by regularly checking bills and credit scores.
• Where possible, use a secure online payment service like PayPal or WorldPay.
• Use credit cards rather than debit cards.
• Don’t keep your personal or financial information (including account passwords) on your computer; use a removable storage devices, such as a USB stick.
• Don’t give out personal or financial information to vendors over the phone, through the mail, or online, unless you are absolutely certain your contact is legitimate.
• Try to make all of your online transactions with one credit card.
• Keep a record of what you pay for and always check your online purchases against your credit card statement(s).
• Always check the privacy policy of any website that requests personal details.  If the website is requesting this type of information and does not have a privacy policy, it is not wise to submit your information.
• When submitting information online, make sure there is a “lock” icon on the browser’s status bar (and that it is “locked”); this tells you that the site is secured.
• Keep your operating system, anti-virus, anti-spyware and firewall software up-to-date. [4]

Laws that Help

• Ryan Haight Online Pharmacy Consumer Protection Act of 2008
• Controlled Substances Act

References

1. “ECommerce-Guide Essentials“, ecommerce-guide.com.
2. “WeeWorld Survey Says Teen Spending On The Rise“, virtualgoodsnews.com (Jul. 7, 2009).
3. “The Girls Scouts Are Old School – Stop Cyber Cookie Promoting“, babble.com (Mar. 13, 2009).
4. “Information on personal information safety“, wiredsafety.org
5. “Controlled Substances Act“, wikipedia.org

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Now that you know much more about kids and online commerce you’ll be clear on what precautions to take as and when you go for an account along with your kid. Not only that now you are in a far better position to even guide your friends and your near and dear ones on the same issue. Ensuring internet safety for kids involves some immediate action and the learning continues thereon.

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