How do you tell your kids you need to downsize Christmas?

On a recent snowy afternoon, Eliazer Zarate sorted through a stack of Nintendo DS games on sale at Toys "R" Us in Schaumburg, looking for what Santa Claus would bring his 12-year-old daughter.

His other two daughters, ages 9 and 6, asked for an iPod and a "High School Musical" doll, respectively, he said.

Unlike in past years, when Zarate and his wife might buy up to 30 presents for the kids, this year each daughter will receive one gift each from Santa - plus clothing, shoes and other "useful" gifts from Mom and Dad, he said.

"We're going to buy for them what they need," said Zarate, who works as a chef at a steakhouse in Barrington. "There is less work these days, my hours are going down, so this is what we have to do."

So how are they explaining this to their daughters?

"We have been telling them that the economy is bad, and that we are giving money to those who fight in the war so they can have food and a place to sleep," said his wife, Bertha. "This makes them think, and it's a way to explain things without being too harsh."

It's a tough economy out there, even for a kid, and it can be a real dilemma for parents to explain a reduced Christmas. Should they shield their children from the hard times? Or is it better to share the reality that more families simply can't have it all, even at Christmas?

It depends on the age of the child, says Michal Ann Strahilevitz, a professor of marketing and consumer behavior at Golden Gate University in San Francisco.

But, especially as children get older, Strahilevitz thinks it's important for parents to talk openly about what their families can and can't afford and to make it a life lesson, of sorts.

"Money is not the best way to show love to children," Strahilevitz said. "So if you need to cut back on spending, think about other, nonmonetary ways to make the holidays special for you and your family."

Retailers that focus on teens and children, among them Abercrombie & Fitch Co., American Eagle Outfitters Inc. and The Children's Place, all reported a drop in sales in November compared with the same month last year. Department stores also reported lower sales for the month, though retailer Bon-Ton Stores Inc. said children's wear was among its strongest performers.

For that reason, some retailers are stocking up this season on items for teens and children, the idea being that if parents are going to spend money, it'll be on their kids.

J.C. Penney Co., for instance, is putting a special focus on their juniors department, says John Tighe, a company vice president who oversees that portion of the business.

"We consider the teen an influencer within the family," Tighe says, referring to market research that has shown that teens at least in better times have been able to persuade their parents to make purchases of all kinds, from clothing to computers and TVs.

Contrary to the slumping retail sales trend, Plato's Closet in Libertyville has had a great year, said owner Pam Ohman. The store is part of a chain of secondhand clothing shops catering to teenagers and twenty-somethings. In the past, November and December were the slowest months because people preferred to buy new clothes as Christmas gifts, Ohman said. But November was among 2008's strongest months, and December is already off to a good start, she said.

By the time parents come in with their kids, conversations about having reduced Christmases seem to have already happened at home, Ohman said.

"The kids are trying stuff on, and when they pick something, it's 'OK, now it's going to get wrapped and put under the Christmas tree,'" she said. "In the last couple of years teens have been getting more and more comfortable with resale shopping, and the economy has definitely helped to spur people to come in."

Indeed, some businesses that provide goods and services for children report they're doing relatively well, and some have even seen an increase in profits.

At BabyEarth, a Texas-based baby products retailer that focuses on higher-end, eco-friendly products, officials say they've seen a slowdown in sales growth in recent months, but that sales are still increasing.

"Even in this economy, parents are still shelling out $900 on Orbit Strollers, $12 for spiffy BPA-free glass bottles, $395 on organic crib bedding and even $300 for organic crib mattresses," says Cathy Hale, a spokeswoman for the company.

She's a parent with two young children, too, and says that while her family is eating in more, traveling less and "enjoying the things we've got," she's also much more likely to do without things for herself than her children. She thinks many parents feel the same way.

"Eventually, they will grow up and face the same stress and challenges we all face," Hale says. "What's wrong with spoiling them now? These sweet-spirited innocent years are so fleeting."

In the end, most parents know that the spirit of Christmas is what matters, said Rosa Montiel of Rolling Meadows. Her husband, a commercial painter, didn't find any work for about a month earlier this fall, and the family is just now getting back on track, she said.

Last week, Montiel shopped for Christmas tree ornaments at the Dollar Tree store in Rolling Meadows and was looking forward to decorating the family tree with her two children.

"We're going to buy fewer presents. We'll probably give them the toy cars they like so much," she said. "There are other things we have to pay for first, like the rent for our apartment."

• Daily Herald news services contributed to this report.

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