Here are some cheap and fun ideas I've used to entertain the kiddos this summer:
Hiking. We discovered that this is actually possible this summer, when we'd had ourselves convinced we'd have to wait years to enjoy this hobby again, Wrongo! The kids probably have more fun than we do, picking flowers, finding stick swords, pretending they're in Snow White's forest. It's the perfect activity for them to use their imagination, and it's good exercise.
What is is about grass that is so much fun for kids. Seriously. I'm like 90% sure we surround our kids with WAY too many toys. I'm not kidding. Clear off the lawn and watch the mad skills with the somersaults.
Never underestimate the power of a little cornstarch, water, and some food coloring. It makes up a mighty fine potion, a big mess, and a good opportunity to teach the kiddos about liquids and solids.
A big blow-up whale in our little blow-up pool, add in some neighbor kids = absolute hysterical mania. Way to go Daddy for your ingenious 6 dollar supermarket find, the whale is a BIG hit.
And, if all else fails, just turn on the tunes. Kids love to dance, especially my kids. Speaking of which I couldn't resist posting this little video of Hannah, it's priceless. She does this little run-dance thing would be totally cheesy, but since she's only 4 it's totally hilarious. Enjoy!