For relatives, co-workers and friends you see regularly, a gift is in order for both political and protocol reasons. However, for co-workers and loosely associated friends such as neighbors, I wouldn't feel obliged to give money nor anything pricey. A gift valued at $10 or less would be fine. Ideas such as a small keepsake charm for a bracelet, a small stationary set, a tiny but nice picture frame, a mini-scrapbook etc. You can find things like this at a pretty reasonable price at craft stores like Michaels, or JoAnn Fabrics, also check out your neighborhood pharmacy if they have a small gift shop.
For relatives, even you don't see the child often, I'd still get them something nice. If your budget is tight, don't stretch yourself thin. It's the thought that counts. Get something that has meaning rather than cost behind it. A nice book with words of wisdom about life, a nice pen, anything that might be useful when they go away to college. If you're not sure on a specific gift, a cash gift of $20 or more would be nice. After all, your children will be graduating, getting married, having birthdays etc. one day also. You wouldn't want any slights today, to affect relatives' feelings tommorrow.