Each to their own, of course.
IMHO if people give money for toddlers, they’re basically asking you to do their Xmas shopping and wrapping for them, as a toddler usually prefers a gift to unwrap rather than choosing their own.
So, no need to thank them for the thoughtful gift, as there isn’t one. You’re only thanking them for giving you the money to buy and wrap it for them.
My ex MIL used to do this. It drove me crazy. She was retired and in good health. Regularly travelled and went out, booked and ordered things online. Yet, showed so little interest in her GCs she clearly didn’t have any idea what to get them (and never thought to ask). Or, frankly, couldn’t be arsed. For years, she’d thrust money on me when she knew I was run ragged with work, caring for 3 young kids and housework. I struggled to sort my own gifts! But apparently, she expected me to buy and wrap hers too. After a few years of it, I told her to give the money to my ex (her son) if she wanted someone to do her shopping for her.
When my DC were toddlers, I wrote the thank you cards and they wrote their name. That’s why we sent cards when they were little, as they couldn’t send texts. It instilled in them from an early age the manners to say thanks. We often used to make the cards as a little craft activity in Jan. They loved making them, sticking on stamps and posting them in the box.