I agree with lyss. Just be honest. Tell your friends that you just can not afford to buy so many presents anymore. I would ask them if they would prefer you bought them a present, or the kids a present, or if you all just give up presents altogether and have a get-together instead. I'm sure now that they have kids some of them are finding finances a bit tight, so they might appreciate you bringing it up so they don't have to get you a gift anymore.
We only get gifts for family, our friends just receive cards in the mail (and that's expensive enough).
Best of luck, I'm sure it will all work out great for all of you