Beginner team, where to begin?

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I recommend you help them find a sponsoring machine shop. Blowing the entire budget on a mill won't help with acquiring material. Coming from a team that started out similarly, I recommend getting some hand tools to start with. Good hacksaws, vises, drills, and files will assist in assembling the kit frame. Get a soldering iron, solder, heatshrink, wire, strippers and a crimper as well. See if the students themselves can lend tools. My socket wrench was used for robotics more than anything else while I was in high school. It's not glamorous, but sometimes, that's what it takes to get going. On the upside, you can teach them the art of precision work without fancy tools, at least until that time comes.