Ask HN: Dealing with kids desire for virtual goods

My niece is very much into Webkinz and these days she is having fits about how much she wants to buy a 7$ (real money) wardrobe for her virtual pet cat. She even says she'll pay with her own pocket money.

Of course her parents aren't too trilled about it, they have went out of their way to explain her how its just a way of exploiting her but it doesn't goes through, maybe she is too young to really understand yet. Since it didn't work and I am “the internet knowledgeable person”, they turned to me for advice and I am not sure at all about the best way to deal with the situation and other kids in the family were never in such a situation because these online “communities” only appeared when they were older. Of course the ultimate goal is to be satisfied with the buying choices she make not be a victim of her impulses. There is of course fear that just saying “no way” will make her worse once she is old enough to be free to do what she wants.

I'd say let her buy the thing and she'll realize how much it isn't worth it but I am not sure it will work as she has little other use for the money. Maybe show her how to build her own stuff but I doubt she'll see it as being as cool. Maybe suggest a different online gaming platform that isn’t so much about exploiting the children’s vulnerability. Maybe just cut down the time she spends online so that she develops other interests and get a relative sense of the value.

What do you think? Any suggestions?