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Another option would be one of the basic brick sets and a baseplate. Combine that with the above and you have plenty of creative building options.
I wouldn't do just the latter. As a kid, I built a lot, but the playability was driven by the minifigs and vehicles.
You will also see similar sales in the spring before Easter.
Prime LEGO buying season (for me) is January and July, when the big stores start running clearance sales. There are reports of outlandish deals like 75-90% off. I've managed to find several items around 50% off in years past at Wal-Mart, Meijer, and K-Mart.
Though I live in Australia and from your comment on Wal Mart i take it you in the US.
Hopefully someone familiar with import regulations can chime in. For some sets it is actually lower cost to buy on a secondary market (BrickLink or eBay) and pay for shipping to Australia compared to purchasing locally. Go figure. But I suspect one needs to be fairly savvy in watching the postage rates and import duties to make this really cost effective.
Another thing I do is take my son to the store with me and watch him and see the sets that he looks at and picks up the most. I dont buy for him then and there unless he has done something that has earned a new set, then come back later and buy it for a gift at a later date.
Another great place to start and this is actually how I started with my son is just get him a bucket of bricks. He ended up geting 2 of the same bucket on X-mas about 2 years ago (he was 4) and has been building since. Last year we had to get his sister her own bucket as she wanted to play with Daddy and Brudder! All and all give your son a bunch of bricks, new, used, or sets and let him and his imagination run wild. Always encourage his creativity!
Yes, In Australia our Lego is more expensive then just about any where else in the world and although I buy most of my Lego from OS (Amazon.fr, amazon.es & toysrus.com) you can get some good deals in Australia from time to time.
From my experience the two cheapest retails stores for Lego are Kmart & Big W, with Kmart being a little better price wise most of the time (This can vary set to set though). Both these stores sell some Lego at around 10% below Recommended Retail all the time. When they have sales, some items are quite competitive with US pricing. Myer will also have "Buy Two Get One Free" on Toys about twice a year, which can make for some great deals if you can find 3 items of similar price to buy.
My son is 4, turning 5 early next year, and he is a big fan of, Police, Fire, Ambulance and Trucks. So the city theme is what he has the most of. Have a look at some of the following sets, as I think they are a good size (You still will probably have to help construct at first) for this age group. Tipper Truck #4434, Ambulance #4431, 4x4 Fire Truck #4208 & Prisoner Transport #7286 These retail for $29.99, but they were all $23 last time I checked at Kmart.
Lastly a couple of things, check out Target this week as from Thursday they have a "Buy One Get One 50% off" on all toys. Currently they have City Garbage Truck #4432 listed at $23 and the City Police Station #7498 at $99. (RRP is $149).
If your son likes the Cars animated movies, Toys R Us in Belconnen had all the Cars sets on clearance at about 50% off a week or two ago, I'm not sure of stock levels, but they had a heap of the Cars Tokyo International Circuit #8679 for $79.95 which at that price is decent.
Anyway have fun with it, Lego is a great toy for children and even us older folks.
He has been allowed to play with lego since he was about 18 months old and to be fair he's not swallowed a piece yet.
A small creator house like seaside house or log cabin if you can get your hands on one, a couple of sets with a couple of cars (police chase has 2 and a trike) and anything with animals or dinosaurs is good - the dino sets should be coming down in price and I got 2 for him, stored away, at 75% off. Also throw in a few collectible minifigs just for variety and you're set.