This is a great craft for kids and it is totally affordable. You can use many different types of paper or even fabric. Paper bags work great but so does construction paper. If there is a theme or holiday around the corner you can paint the paper using colors that bring the theme or holiday into your craft. When using paint, you can add a little bit of water to the paint so when it dries it doesn't tend to flake and it spreads easier.
You will want several panels of paper (it really depends on how many strips of paper you need and how many varieties of paper patterns you want to use). Pick one paper that will be used as the base. fold this panel into half and mark a line one inch from the edge of the unfolded side. Make slits from the folded side to the line on the unfolded side at one inch intervals.
Take the other papers to be used and cut one inch strips (make sure you cut the paper so the strips are long enough to fit from side-to-side on the base paper).
Weave the strips of paper through the slits in the base. Using a glue stick or tape, secure the ends of the strips to the base.
Enjoy your beautiful cloth-like craft!