I have a small number of knitting worsted scraps, but not enough for more than a few kids to get started. I could probably get the most mileage for my $$ by buying one of those economy sized Super Saver acrylics and then re-balling them for multiple children/projects. As for needles, I have managed to make 9 inch 5mm needles for only about 44 cents per pair using dowels and dollar store wooden beads. I think they have turned out rather well.
I rubbed the needle shafts with candle wax then warmed them over a candle flame and rubbed them smooth. They work very well and are extremely light. Of course I have been spoiled by the slick surface of Addi Turbos and find that these drag a little, but I have heard that a little friction is desirable with new knitters......less dropped stitches.