My teenage son would sell his own mother for $5.00 (yes he would regret it come dinner time) so the money in the card is always his favorite. However as soon as the stores open the following day and he has nothing but 25 empty chip bags, 12 empty soda cans and a tummy ache to show for it, he always climbs into his flannel PJ bottoms and comes and tells me that I was right he should saved his money for something nice.
I have a recording on my cell phone with my son saying, "If I had I a nickel for every time mom was right and I was wrong, I would be a rich rich man." I will treasure that forever!
My sons favorite sewing gifts are: backpacks in his favorite NFL fabric, Ipod covers, pillowcases, Pj bottoms, Zip drive covers, CD cases, Nintendo DSI covers. Kids now days have soooo many electronics and they do not handle dust very well-plus the other kids at school think the personal covers are cool.
Kids know who gives what kind of gifts. My kids know if they want something from the heart they come to me and if they want their pockets lined they go to my husband. At christmas the following year they wont remember any money in the card, who gave it to them or what they bought with it, but they most likely will be wearing a very worn out pair of PJ bottoms secretly hoping one of those packages under the tree is containing a new pair.
As for your friend I think your on the right track.