The four-gift rule states that you should cap the amount of gifts you buy your kids to four, one of each of the four categories: something they want, something they need, something they wear, and something they read.
Rule 1 - WANT
This is a "key item," or something that they really want.
A Christmas present chosen by the child is usually the "major" gift they obtain. They can make a list of a few options from which the parents could choose, or they can choose an option and receive it. The surprise factor is part of the fun of receiving a gift, so the list of options appears more interesting.
Rule 2 - NEED
Based on the child ’s needs, this may be up to them or the parents. Starting a 529 College Savings Plan for a child may be a good idea. It could be a notebook for a teen starting college in the fall as well.
Rule 3 - WEAR
Given that four gifts isn't a lot, perhaps make the gift in this classification a little better than previous socks or underwear. A new winter jacket or a pair of high-end sneakers appear to be more suitable.
Rule 4 - READ
This category overlaps with the first for some of us. The best gifts are books! This is yet another category of splurge. If your child is very young, consider a complete set of Golden Books, and for older children, a complete set of Harry Potter or the entire works of their favourite author.