Several years ago, someone who wanted to learn to knit approached me with three 50g balls of fingering-weight yarn and asked me if that was enough to make a sweater.
Um, no. Sorry. Probably it would make a decent pair of socks, though.
The thing is, unless you want to clothe yourself in Red Heart, the red-headed stepchild of the knitting community, you will have to spend some real money on yarn. There are some really amazing yarns out there. I haven't really had to purchase much in the way of yarn because, well, I make my own. I don't even have to buy that much in the way of fiber, because my mom is good buddies with people who own sheep, and she spreads the love to me. Free fiber! Yay! And then there's the fact that the last couple of years, I've gotten gift cards to The Woolery for Christmas. Yay again!
That said, all the money I've saved on yarn has gone into the obscene amounts of time required to make it. (Plus the wheel itself wasn't exactly free) Carding 4 oz of fiber with my hand cards can take up to 2.5 hours (maybe I'm just a slow carder?), and then depending on the weight, it can take anywhere from an hour to several days to spin it up. Before I got the faster flyer on my spinning wheel, it look me a whole month to fill my bobbin with a single ply that I later made 3 ply. With my faster flyer, the same amount of spinning takes "only" a week.
But then, there are other ways of acquiring yarn. I made a huge shawl for my little sister using LionBrand wool-ease that I got for $0.25 a skein at a yard sale. Wool-ease usually retails for $6 a skein, I think, so this was a fantastic bargain.
That's an old picture. I've had two kids since then, and I'm 20 weeks pregnant now. So enjoy it. I still have that pink shirt, though.
I've also heard of people snatching up old sweaters and other knitted items from thrift stores and unraveling them. I understand that this is the very best way to get your hands on cashmere and wool/ silk blends. I did that once, but I haven't done anything with the yarn yet. It's green fingering weight, but only boring old cotton.
Occasionally you can find "ok" yarn at the dollar store. Yarn shops also have occasional sales.
Main point: Don't let pricing get you down. There are ways to work around this hurdle.
Even though I said that stuff about bargains and pricing, the bald fact of knitting is that no one really does it to save time and money.