One of the cheapest places to hold your children's party is your house or apartment. If you have the party in your house you can have the guests in your livingroom or basement or backyard.
However, if your place is small or you don't want the hassle of extensive cleanup before and/or after your guests leave or if you live in a place that is out of the way there are still other cheap places to hold a party. If you are willing to hold your party during the week you can have your child's party at his or her school or daycare. Most of the time you need to ask the teacher's permission or the school's permission to do so. The advantages to doing so is that you don't have to worry about a lot of guests not showing up. If your child has 20 kids in his or her classroom chances are all 20 kids will be there minus maybe a few who are sick that day. You also don't have to spend money and/or time decorating the house. Nor do you have to wait sometimes hours for youur guests and their kids to show up. After all the kids will already be there when you get there.
Other cheap ideas are fast foods like McDonald's. As long as you have a certain number of guests they will usually set aside an area of the restaurant (or some may have a designated playspace), and all you have to do is pay for the food.
Another free place is the park. However, the disadvantage of that is unless you arrange things only a few days before it could possibly rain. This means you have to have a either a plan B as to where you should hold your party or a raindate which cold be inconvenient for your guests or entertainment as they may not be able to make it on your raindate. Also, another disadvantage is some parks do require you to have a permit if you are having more then a certain number of guests (you need to check with your local parks department on that)
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