I went to a 4th birthday party this past year in the park, and the birthday girl's parents had come up with a really great system for favors: They had the kids basically make them themselves and that was the whole party! First, there was a large picnic table full of fun and colorful art supplies. Each kid got a brown paper sandwich baggie, and had maybe 10 minutes to decorate it. The kids had a lot of fun sitting around and doing this, especially because when they asked what would go inside, they were told "surprises they had to find later." Once the bags were decorated, each kid got to pick a long piece of ribbon, and there were many different ones to pick from in all sorts of cool patterns and colors. Then the parents just stapled the long ribbon onto each bag, one end on each side of the top of the bag so the ribbon formed a strap.
With their goodie bags proudly strapped on over their shoulders, the kids then went on a scavenger hunt, in which each child took turns finding the next clue for the group. When each "treasure" was discovered, inside they found enough surprises to share with the group (there were 12 kids, so there were always a dozen of the exact same item). The treasures where really simple, like plastic eggs filled with jellybeans, or a little piggy bank filled with pennies and each kid got 3 pennies; there were also stickers, whistles, temporary tattoos and stuff like that.
All in all, it was by far the most fun my kid has had at a birthday party, I think because there was a purpose and there were so many surprises, and they were able to be creative, which kids love doing. In the end, each kid was totally thrilled with this simple little goodie bag which filled up their afternoon and was frankly filled with nothing more than maybe $2 of stuff. My daughter still has that bag and plays with it all the time, too, 10 months later!
Do you have any thrifty party favor ideas to share?