The best Christmas ever? Often it was pared down.

As a child growing up in subsidized housing in Palm Springs, Calif., Kim Allen-Niesen celebrated many lean Christmases.

"Rarely did I get what I asked for on my list," she says. "There just wasn't the money." Even so, she adds, "Every Christmas was lovely. I learned the value of sitting in front of a lighted tree and drinking hot chocolate."

In this recessionary year, as many families face tight budgets and pared-down holidays, experiences like Ms. Allen-Niesen's ring with special resonance. In varied circumstances, she and others have learned that making do with less elaborate celebrations doesn't mean having to settle for a less satisfying Christmas. They offer reassurance to parents and others that downsized gift-giving can bring its own rewards.

"Parents should view this poor economy as an opportunity to show their children that simple gifts, home-based activities, and laughter go a long way," says Charles Sophy, a child and family psychiatrist in Los Angeles.

Allen-Niesen, now a writer in Los Angeles, recalls fondly the year her mother bought an ornament-painting kit at the drugstore because they could not afford tree decorations.

"We spent hours painting wood cutout ornaments outlined like coloring book pictures," she says. "Some were well done, some were awful, but each year when we hung them, I had the same warm feeling. I have no idea what presents I received during the lean years. But I've never forgotten our hand-painted ornaments."

As a boy, William Elliott Hazelgrove remembers his father often telling him that Christmas was going to be lean.

"He was a salesman, so his income fluctuated," says Mr. Hazelgrove, of St. Charles, Ill. "As a writer, my income has always fluctuated, too. But I never give the 'It's going to be a lean Christmas' speech. The kids seem to be happy with the gifts they receive, as long as traditions are kept. That is really what children value. Putting up the tree, drinking eggnog, going to see the lights in downtown Chicago – that is what I always remembered. Even when times are lean, Christmas can be enjoyed as if there were many gifts."

That was also Jenn Savedge's discovery one pared-down holiday when she and her husband were first married. She was in graduate school, and he was working seasonally as a park ranger. They lived far from friends and family and had no money to go home for the holiday.

"We couldn't even afford a tree," says Ms. Savedge, of Luray, Va. "So we had what we called 'the $5 Christmas.' I thought it was going to be difficult to find a meaningful gift for my husband for $5, but I found a lot of things that didn't cost a cent. We even 'made' a Christmas tree and decorations out of painted newspaper. It was a fantastic holiday. I've never forgotten the lesson I learned that year – that you don't have to spend a cent to enjoy Christmas with the people you love."

For Lynda McDaniel, a business writing coach in Seattle, her leanest Christmas ranks as one of her best holidays. She had moved to the mountains of North Carolina as part of the back-to-the-land movement in the 1970s. "My husband and I had virtually no money to spare, but I was determined that wasn't going to stop my Christmas celebration," she says. "I bought him warm socks and an apothecary jar full of M&Ms. He got me socks, a little labelmaker, and some candy. It was all about the spirit of Christmas."

One year the only Christmas present Monika Nagy received was a bag of instant mashed potatoes. Yet she calls it "the best Christmas ever," because she had not eaten potatoes for years. "My father worked in Cuba, and there was nothing but rice," says Ms. Nagy, a certified credit analyst in Orlando, Fla.. "I was allergic to rice and craved potatoes. My mom exchanged one of her blouses with a Russian woman for that bag. That was a real Christmas."

For many years a "real Christmas" at Ben Bradley's house has involved what he calls "wonderful excess." Not this season.

"The markets flattened everyone in my family," says Mr. Bradley of Glen Ellyn, Ill. "Money is tight. Instead of giving gifts to each other, we decided to do something for others. My son is doing what he calls the 'secret shoveler.' When it snows, he sneaks over to the neighbor's and shovels the driveway. My wife 'adopted' a young family that needs help. I'm helping a soldier get back on her feet. My daughter sings at the convalescent center."

Referring to gifts, he adds, "I don't need anything. Another sweater or tie or pocketknife won't make me happier. Getting back to basics around Christmas is the best gift you can give yourself."

Mary Staton, a financial coach in Charlotte, N.C., is adopting a similar attitude. "The holidays are more significant this year as they are being played out on a more realistic and sincere basis," she says. She and her husband, Bill, have asked their children to forgo gifts for them and instead cook a family dinner for everyone to enjoy.

Scaling down is also part of Dandi Daley Mackall's holiday. "I know it's odd, but I'm excited about our family not having as much to spend on Christmas this year," says Ms. Mackall, an Ohio author. "We're being forced to do what we claim we want to do every year. We're cutting back. We're doing what I always did with my mom and sister when we were kids – making cutout cookies and taking them to shut-ins and elderly neighbors.

"I don't think many people even remember what they got for Christmas last year," she adds, "and if they do, can they find it? But volunteering, sending money for disaster relief, picking out a toy for tots, or baking cookies – that we'll remember."

What Toni Andrews most remembers is a holiday 20 years ago with friends in California. Initially, everyone was sad because they couldn't afford to buy gifts or throw a party. Declaring a "dime-store Christmas," they bought stocking stuffers with a $2 limit. They also cooked a hearty meal and scrounged videotapes of Christmas movies.

"In the intervening years, I've spent holidays at lavish resorts, at big family gatherings, and quietly on my own," Ms. Andrews says. "I've given and received luxurious gifts and attended glittering parties. But whenever I'm asked to recall my best Christmas, I think about sitting on the worn carpet of my friends' apartment, playing children's games, and watching three different versions of 'A Christmas Carol' in the company of good friends."

As holiday celebrants put final touches on shopping, wrapping, cooking, and decorating, some will identify with Mark Henderson of Littleton, Colo. Because he started a new business and his wife was recently laid off, their income is down substantially. But, he says, "We realize that Christmas is about the birth of Christ. We have our family, a roof over our head, food on the table, and our health. This is more than a lot of people have, so we consider ourselves blessed. We will do what we can to help out those less fortunate."