We do the same thing! The year they kids were born they each got a 1st Christmas one, then Troy got a photo one for his 2nd year, then last year each kid helped me make an ornament of something that they love. Troy picked a train, Rachel picked a Princess crown and Lilly got a heart (since she was 2 months old). This year I was thinking of buying a craft kit of foam wreaths and letting them each make one to hang on the tree. I always write their name & age on the back.
I love looking at our tree and seeing them. Hopefully down the road our tree will look like yours. <3