A Tree for Tots

Rather than put up just one big Christmas tree for the family, try putting up a small tree as well, for the kids. They can make their own decorations, wrapping paper, ribbon, and string their own popcorn. On Christmas morning they can hand out the presents from their own tree.
The beauty of this is kids can make decorations as well. Don't worry if the ornament is perfect or even a Christmas theme, the point is the child is using his/her creativity and fine tuning motor skills through coloring, playing with clay, or using (safety) scissors.
Putting the ornaments on the tree also challenges the child to use eye-hand coordination and how to balance items.
Plus, this could easily start a tradition of a new ornament each season for the child to cherish years after they've moved out (hopefully) and started their own families.