Don't put key loggers on it only ends in tears. And I agree it really is a bit much looking at all your kids personal correspondence.
Right the best way in my opinion is to use a safe Internet proxy for the little darlings. There are tons of them out there and you can usually change the account so as they get older you can relax some of the sites.
a google for "child safe internet proxy's" stay away from the sites run by god bothers in the US or your kid might come a way thinking Darwin was an anti christ.
The way it works is you give the kid an account which doesn't have any admin rights and set all the internet to go through this proxy server. The server has a list of banned sites if the kid tries to access one it just won't let them through.
You can if you wish while logged on in your own account switch back to none proxy Internet.
I have worked at sites which have gone to extremes with page keyword searches and nipple recondition software. That solution is just a pain. You get heaps of users locked out because of trying to get recipes off the web and if you have any dealings with Scunthorpe county council you are knackard.