Another good way to prevent internet access on an iPod Touch is to go to the settings-->General-->Restrictions. Here you can set a 4 # passphrase, and then selectively disable: Safari web browser YouTube iTune Music Store Application installation Location That's a good solution because it'll prevent usage of the internet anywhere, not just your home.
You can also use the configuration utility for your router to use the MAC address filtering function to block the iPod Touch from connecting to your router to access the Internet.
Yes you can password protect your WiFi in your home network. A iPod touch or IPhone use WiFi just like a computer. If you password protect your router and WIFI network, then if some tries to access your network to go on the internet they won't be able to connect.
They will need your encryption key for you network to get on it. This will not stop your kid from using a open WiFi to get on the internet at there friends house. I have a Mac and it has parental controls.
If the iPod Touch doesn't have them then there is most likely an "app for that" in the app store. Most of the iPhone apps will work on the iPod touch. If you look for an app then it will be a parental control or firewall program.
If you need more info let me know. I hop I was helpful.
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