The first Christmas tree decorations were most likely small candles hung between branches. All of the expensive ornaments, tinsel, garlands and lights we now think of were much later additions. Most early Christmas ornaments were either made by hand or fashioned from inexpensive materials such as clay or flour dough.
One inexpensive source of Christmas tree decorations is a local "one price for everything" discount store. These stores often display inexpensive decorative items around the holidays. Traditional ornaments for the tree can usually be found for a fraction of the retail prices charged elsewhere. A discount store may also carry wrapping paper and empty boxes suitable for creating decorative presents around the tree. General party decorations such as crepe paper or other streamers can be purchased in traditional Christmas colors and used as inexpensive garland for the tree.
Another source of inexpensive Christmas tree decorations is your own home. A generous supply of sewing thread and popped popcorn could become a garland. The artwork on old wrapping paper could be decoupaged onto stiff cardboard and trimmed to become Christmas ornaments. Various shades of inexpensive ribbon could be woven together to form a garland as well. You might even consider thinking outside of the box and turn ordinary items into whimsical decorations. Make ornaments out of crumpled balls of duct tape, for example, or hang small office supplies on a company Christmas tree.
Candy can be an inexpensive form of Christmas tree decoration if the right discount store can be found. Some crafters make ornaments out of round Starlite mint candies by arranging five pieces in an open circle and carefully melting them at low heat in an oven. Once the candies have cooled, they can be attached to the tree with a small piece of ribbon. Other hard candies such as butterscotch or cinnamon disks could also survive this process, so children could mix and match candies and the adults could bake them.
Instead of hanging expensive ornaments or elaborate lights on a family Christmas tree, you may want to hang photographs taken throughout the year. Pictures of beloved relatives could also be attached to various branches. Even if your supply of old photographs is low, you could still snap dozens of digital pictures before and during the holiday season. The cost of printing out these photographs is usually nominal, and they can become family heirlooms over the years.
Children could also learn some simple paper folding techniques and create dozens of inexpensive Christmas tree decorations. There are many books devoted to the Japanese art of paper folding, also known as origami. Adults could teach children how to make simple stars, animal shapes and other symbols of Christmas. The finished products can be hung individually on the tree, or strung together in a chain and wrapped around the branches.