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We have a rule in our family, that we only buy things for the kids at holidays (if there are kids if there aren't then we get adults things). It helps to keep the price tag down and the kids really would miss a gift. I know I love to see my baby happy and if he gets a gift it is good for me too. If you did that, you probably could purchase something that is more their taste.

@mediagirl: I don't think it's a bad idea to tell them so they can choose what to do. It works for our family (granted, one sister has 4 kids already and want a half dozen more).

We've been talking about only doing gifts for kids on my side of the family forever. I think this year might be the year we actually implement it. I would just spend all your budget on your nephew.
If anything I would go for personalized, unique items.

In my family we do a secret Santa, we each get one person and spend about $50 on that one gift (of siblings, parents and babies are separate). Then we spoil our two nephews, but as more kids enter the equation I could see making it kids only. I think that's a good compromise, since it gets so hard to shop for adults anyway!

We buy for about 14 kids and so last year, when we were paying for our wedding, we told everyone that no more gifts for anyone over 18 except for our parents. Our siblings, who don't have a lot of money, made a bit of a stink about it which was a bit surprising. We stuck to our guns and said Christmas is about the kids so that's what we're doing - don't buy us a gift because we're not getting you one. It worked out and now that we have LO, I'm glad we set that standard. There is a new person to spoil.

I like the idea of an ornament exchange. It's something that's seasonal, you can put it away for the rest of the year but something that will be special when you do take it out. Growing up I loved taking out the ornaments and putting them on the tree, remembering where we got each one, etc.

I'm hoping this year anyone that's thinking of gifts for us, just gets a gift for DS. We don't need anything but I want to keep the holidays special for him while he's small.

I'm definitely going to scale down what we give for gifts as well. More homemade/heartfelt items and less "stuff".

@brownie: We do the same thing on my side, it's more fun to watch the kids open gifts anways. We were just getting each other gift cards, so they would "cancel" each other out anyways. We do give family pictures to the adults, so that is a little something for them to open/look at!

@chrispygal: We had to do this last year also. We tried to implement the buying for kids only and my one BIL and SIL just flat out refused to go along with it. It's them that would benefit from it the most since they have 3 kids (1 on the way) and not a lot of money but for some reason they want to buy gifts. Even though it's super awkward for them to buy us stuff when we don't reciprocate, we've refused to give in.

How about homemade gifts? for a few years I made homemade truffle chocolates and gave them as gifts to family. Everyone loved them! I just saw a cool idea online to buy old pretty tea cups at an antique store (quite inexpensive) and make your own candles in them. and give as gifts. Giving inexpensive gifts doesn't have to be about money -- i hate giving gifts to people just because it's necessary and will be something they forget or won't use. Homemade stuff can be really thoughtful and unique.