We never have a set amount.
To be honest, when we go to WDW, it's pretty much a "buy what you like" experience. But my kids are older (DS10, DD13) & don't go crazy about it. If they were younger, we might have to set a limit because little kids can go nuts.
My kids see me souvenir shop like crazy, so I figure that if I can buy whatever I want, then they should get things too. Neither has ever asked for souvenirs that are not "within reason" though.
In all though...we probably spend about $500.00 - $600.00 in the gift shops.