I had written an article previously about a similar subject for Squidoo, but since then there have been more tablets in the market that are just as good or similar to the ipad. One of the things that you will run into is memory, and processing speeds will be a lot smaller compared to ipads, but it is a sacrifice that must be made. Kindles are good, and cheap, such as the Kindle Fire HD with a 7" screen this is a very good alternative. It has 16gb of memory. I own this model myself, and my son used it for a long time before we were able to get him an ipad.
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Another cheap alternative, and one I feel is more kid friendly is the Nabi. Although the Nabi 2, which is the newest version available is more kid friendly it has a lot less memory with only 1GB, and it cost more than the Kindle Fire HD. But the Nabi will interact, and has Nick themed apps. So it's really a preference of the user, as to which is better. They also have a Disney themed device, and both are pre-designed with the outer rubber case to protect the device.
I have pointed out a couple of different options in which to go if you cannot afford an ipad. So I hope that with this information and knowing your childs preferences I have helped you in making a wise choice.