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Before we sold everything to travel, something that my husband and I have always done is gifting experiences versus focusing on physical things for holidays and birthdays. We want to create memorable experiences that will allow our children to experience life and remember the moments together because that is what life is truly all about. It isn't that we don't gift our children or ourselves with physical items, but more of a focus on the time together and experiences new things together as a family. And now that we live in a small space; experiences over things are definitely more of a priority because we just don't have space for them.
Here are Ideas for experiences over things:
If you feel like you have to give them something, associate that gift with the experience. A sports jersey with tickets to the game or a $10 bill with a note that says buy yourself something on your birthday trip to the zoo.