We, for some reason, have always been broke when birthday party time comes around. For one thing, we have happily established that we do not give as many gifts for birthdays as we do for Christmas, and this has worked out very well. One year, my youngest daughter needed shoes really badly, and I had to make a choice between the shoes and a present, so she got shoes for her birthday. :) When we have parties, I make the cake myself, and if we serve food, it is usually something easy and inexpensive like nachos or hot dogs. Make kool aid instead of buying canned drinks. Go to google.com and look up keywords such as "frugal birthday party games", "frugal party ideas", etc. Write down all of the games that you would like for the kids to play, and make a list of the supplies that you need. Try to find games that require more kid power than supplies. For example, one year, we had a three legged race, a hula hoop contest (whoever can keep their hoop going the longest wins), a balloon stomp (tie a balloon to one leg of each child, on "go!" they try to stomp each other's balloons. The last one standing with a balloon unpopped wins. When we couldn't afford a pinata, we put a few pieces of candy in each of many balloons, blew them up, and when the time came, let the kids stomp on the them, sit on them, or whatever they could do to bust them and get the candy. Some balloons had confetti instead of candy to make it more interesting. Paper lunch bags make nice goody bags to carry their candy home in. If nothing else, have cake and punch at the park. Parks are instant parties, because all you have to do is serve the refreshments and watch the kids play on the playground equipment.