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For inexpensive building blocks save your milk and juice cartons. Once they are cleaned out cut off the tops.
Slip one of the bottoms upside down inside another, so that the bottoms are at opposite ends to make sturdy blocks. Cover the blocks by gluing on colored paper or use plastic adhesive. With wide marker or paper cut outs, put different colored letters on each side of the blocks.
These are great building blocks. Their light weight makes them safer than wood blocks and their size makes them super for building forts.