In my experience (which dates back to a 386 circa 1988) locking down the computer wouldn’t have made much sense. My family’s first computer was not connected to the internet, so it was easy to have a look at what was coming in on floppy disks, and reject anything suspicious. And indeed, that was a skill that my brother and I quickly picked up on our own, because, after having used the computer for a while, we knew what types of files should be where, and knew not to run an executable without some knowledge of where it came from. Most importantly, we didn’t want a virus trashing all of our games.
By the mid 90s, we were already familar with good habits for computer usage, and when we did get internet access, we tended to maintain the same good practices. This isn’t to say that we didn’t get some viruses and spyware over the years, but the strong working knowledge of how the computer operates led us to make good choices with regard to its usage. And that same knowledge let us fix it on our own, most of the time.
I would contrast this with the experiences of many others that I know. To them, for the longest time, the computer was just a box with a screen and keyboard attached. They didn’t have any understanding of why their computer was misbehaving, and therefore were powerless to do anything about it. Or alternatively, they weren’t skeptical enough of why the computer was asking for information like their e-mail address, mailing address or phone number; they just figured, ignorantly, that the computer needed to know.
In effect, my experience bailed me out of trouble on occasion, whereas others would have been stymied, or may have lost data, or may have divulged something sensitive. I’d be inclined to say that as long as your children are acutely aware of the necessity of protecting their personal information (e.g. their real names are often inadvisable to divulge—despite our use of our own on ChiefDelphi), the best thing to do is to walk them through some of the less-child-oriented parts of the internet alongside you, so you can point out things like banner ads (never click!), popup ads (never click, and block when possible), and fake search results. Show them some of your spam e-mail, and explain what it is and why you shouldn’t trust it. In addition to the technical side of things, this will build their media literacy skills, which are so valuable in preparing them to deal with society.
Ultimately, it is their own knowledge and wits that will protect them most effectively. Firewalls and anti-virus utilities can help, but they’re only a small part of the solution. You can judge when they’re mature enough to protect themselves, but be aware that if you wait too long in giving them free reign over the internet, they will discover it elsewhere, and perhaps in a less-controlled setting.
Also, there’s another thing that may or may not apply to your family. Depending on the temperment and perceptions of your children, they may come to resent the idea of you monitoring or limiting their activity—it can easily be interpreted as mistrust of them. To me, any overly-restrictive monitoring program or firewall would have felt like an invitation to bypass it, but I can easily conceive of someone becoming frustrated that they can’t get to YouTube, and blaming it on their parents.