We don't do "proper" parties until they are at school. So the first 4 birthdays are just family around for Birthday tea basically.
After that, yes, we do parties, and yes I do party bags. I hate it when my girls come home with a nasty little plastic bag full of cheap sweets and even cheaper plastic tat. The plastic tat gets broken and ends up in landfill, like the bag, and the sweets just top off the manic sugar high.
Our party bags are either cloth or paper. One year the girls decorated fabric bags with beads etc which they then took home with cake, a mini pack of haribo, a bracelet, a princess wallet/purse and a helium balloon tied to the handle/strap. The idea being that the pretty little bag would be used for dress-up etc at home, the bracelet would get worn, the purse is usable, the cake and haribo get eaten and the balloon clutters decorates someone elses bedroom for a week or so.
In my experience you can get away with really sparse party bags if there is a helium balloon tied to it. I buy half a dozen or so helium balloons and put them in the house during the party, and tie them to the party bags at home time.
This year DD1 will be 7, the party bags are little cotton Hannah Montana fabric ones (I made them from fabric from ebay, it cost £2.50) they will have a butterfly temporary tattoo, a pretty bracelet, a heart keyring (ones you can out a picture in, not decided if I'll put a pic in myself or leave them empty for them to put something in) a mini bag of haribo and a bit of cake, and of course the balloon.
No plastic tat, no landfill fodder, a bare minimum of sweets/sugar. I've bought everything from ebay, you can buy small job lots of half a dozen or so of these kinds of things, I've done it all despite being a WOHM
it's just taken some forward planning and organisation. I probably sound really smug and self-righteous, but I hate crappy plastic stuff, and nasty e-number laden sweets, so I refuse to put that kind of crap in party bags.
But, to answer the original question, no, I wouldn't do party bags for 3 year olds, because I wouldn't do a party for a 3 year old!