One of the most effective methods you can use to protect kids online is to talk to them. The younger you start talking to them, and they to you, the better. Hold regular conversations about online safety issues, even going so far as to show them actual negative events that have taken place. If you don't know what your kids are doing, simply ask. Play the clueless parent and ask them to show you what the latest technologies are and how they use them. Quite often, kids love the idea of being the teacher and will open up.
When shopping online, always use your credit cards instead of a debit card. If any fraud happens, it is far easier to recover your money from a credit card transaction. Gift cards and one-time-use credit card numbers are even more secure.