Sandcastle is great yes, go there!
If you are not wanting to spend much money then:
pack up a picnic lunch (or treat yourselves to lunch out)
Stanley park is lovely for a morning or afternoon, has a gorgeous Victorian Villa cafe there.
The sand dunes in St Annes are a gorgeous very fun day outwith buckets and spades with little ones, will not cost a bean.
Lytham front is lovely with a little train, trampolines, and other fun stuff for kids...its just a lovely walk in fresh air as well.
The trams at Blackpool are great novelty fun, after the sand castle you could get a tram to Cleveleys, get off, get an icecream, sit on the front which has all been done up and is like bieng abroad, (spotlessly clean) then hop back onto the tram to the sandcastle and nip off up to your holiday village. That would be a whole fab fun day out.
There is lots to do in Blackpool, the piers have fun fairs etc on them, bit cheesy but ok for a wander.
You have also got the Lake District an hour up the road which i would HIGHLY recommend, again it would be a full day out but a fantastic day out padling in Coniston, or at one of the Tarns up there.
There are lots of touristy type places pleasure beach , Tower etc, can be pricey and a bit disapointingly run down.
You will all have a lovely time.