I had a Christmas when we popped a bunch of popcorn and bought cranberries, then we strung them with a needle and thread. We wound these long strands of popcorn and cranberries around our tiny little tree and it was beautiful!!
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We made homemade playdough ornaments one year. The recipe for playdough is 1 cup flour to 1 cup salt and add enough water to make it the right consistency. You can use it like clay or roll it out and use cookie cutters…like make gingerbread men, snow men or stars. Bake it in a low oven until hard (I don’t remember how long. Then you can glue on glitter, eyes, yarn, whatever.
We live near the beach and my sisters kids made ornaments out of seashells. Their Dad drilled holes, the kids glued on glitter and strung ribbons through the holes. You could do that with whatever is common in your area and collecting the stuff ispart of the fun.
Don’t overlook cutting out paper stars and snowflakes and pipecleaner candycanes (twist a red and white pipecleaner together then bend to form a candycane. You can either just hang over the branch or tie on a ribbon to hang it with if you want more color.)
If they have a bunch of small toys, like farm animals or small dolls or little stuffed toys or whatever, tie them with ribbons and hang them on the tree.
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Raised kids with little money!

Go to Michaels or AC Moore- make those little foam ones or check out this website:

http://familyfun.go.com/arts-and-crafts/season/specialfeature/christmas-ornaments-ms/
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My son did this for me one year;
Take a piece of poster board and cut into a circle, with a hot glue gun (supervised of course) glue different fun shaped noodles to the edges, leaving enough room for your child’s picture in the middle and punch a hole at the top for the ribbon, before pasting the pic on, you can paint it with child safe paint. My child’s teacher let them spray paint it silver but she used fume less paint (safety first). Then just add the picture and year on it.
I love it soooo much. We put it up every year.

They also have some fun shapes cut from wood at the craft store and they can paint them themselves and add glitter and a ribbon. Maybe a picture of the year.
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Have fun!