The biggest hit at my dd's 6th b-day party (1st graders) was a home-made pinata. It costs next to nothing to make, and you can fill it with whatever you want. At this time of year you could get some halloween candy for cheap, and there's always stickers, erasers and silly bands from the dollar store. For ds's pinata this year (4th b-day party), as well as toys and candies, I put baggies of popcorn (movie-theatre-style bought at the video store up the street) which filled space and the kids loved. You can also make big confetti out of coloured paper (just let the kids loose with a pair of scissors!) and it's really festive when the pinata breaks open.
How to make the pinata:
First make your paste. The ratio is 5parts water to 1 part flour. Heat it to boiling in a saucepan. Boil for 2mins. Let cool. Blend with hand blender. Wash hand blender right away.
While the paste is cooling you make the strips of paper. Rip newspaper into strips about 6-8inches long and 1-1.5inches long.
Blow up a good-quality large balloon.
Dip the strips of newspaper into the paste and use them to cover the balloon. Leave an uncovered space at the top large enough to put the prizes in.
Let dry, then do a 2nd layer.
When the 2nd layer is dry wrap a long length of string around the balloon, top to bottom. Tape it in place. Wrap a 2nd string around the balloon at a 90 turn from the other string. Tape in place. There will be 4 string ends all at the top of the balloon (where the hole is). These will be for hanging the pinata.
Now you can do the 3rd layer. You might want to do this in white paper strips so that it's easier to decorate. OR you can use brightly coloured strips for the 3rd layer and then the layer itself will be the decoration.
Let dry, then pop the balloon and pull it out.
Fill the pinata and cover the top with paper. Tape in place and paper mache over it with white paper (or coloured if that's what you want).
Decorate to look like an animal, or whatever else, or just to be fancy and festive.
For ds's b-day we did the pinata inside because it was pouring rain outside. We used a curtain rod (an old one we happened to have lying around - you could also use a broom handle) and hung the pinata from it with one person holding each end of the rod up.
ETA - IMPORTANT: leave enough days to complete the pinata. I did one layer per evening so it took 3 evenings. The decorating can take another evening. I found it a pretty good veg-out activity while watching episodes of a tv show I had downloaded. ;)