I had a very frugal carnival party for a 6 year old. All the games were made from items we had on hand. Prizes came from Freecycle but you could do the same for a very little more expense by purchasing from Oriental Trading (or the Dollar Store).
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Carnivals are a great idea for kids of that age! There are many classic carnival games that you can play with small or large groups of kids. Since everyone wins a prize, every kid will go home happy. Make tickets for the invitation, and serve carnival food like popcorn and hot dogs.
Hope this helps,
Megan
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