Few of the clothes that no longer can be used for wearing due to wear and tear, I use it in multiple areas like kitchen as a kitchen towel/cloth, to wipe the floor, cleaning cloth for gardening purpose and to wipe furnitures. You can even stitch such clothes and use to make a rag doll for kids to play. This saves money for expensive toys and other special towels/scrubs.
Most of the discarded clothes go for mopping and dusting at my place. Though there're clothes which particularly are meant for these works, but the person who does all these works at home asks for soft cotton clothes. According to her, these cloths are better to perform such activities. If have time, I make wrappers stitching the long clothes together.
Interesting that you mention this because whenever I am cleaning I use my old t-shirts haha, so there is always some nostalgia involved. Apart from t-shirts, there is not much I reuse, just eventually old jeans that I turn into shorts. Whenever I have clothes I no longer use I give them to people who need them, I think it's the best reuse they can have.
I often cut up old clothes and use them for quilt squares since I learned how to quilt a few years ago. You can also make little pillows and other crafts with them. I recently read that you can cut up old denim jeans and use them as home insulation. You would need a lot of jeans if you were to use them for a whole house though.
Same experience with me some of my old clothes I am no longer using and don't think they look nice enough for gift I convert to rags. I make use of the rags mostly in the kitchen to clean tables, the burners and every part of the kitchen. I also use the rags in other areas of the house needing cleaning. At the kitchen it helps in carrying hot pots and other hot substances while cooking.
Very good ideas to save money with old clothes. Before our clothe get too worn we donate it to thrift shops so others can save money too. I don't know how a person can accumulate so much during a lifetime, but clothes does accumulate. I love old t-shirts and do where them till very thread worn especially if it has a memory to it. I stitch it up and save money by not having to buy another t-shirt too soon or wait till t-shirts are very cheap on clearance to save more money.
Old clothes which are already out of style are usually thrown away. This is what the attitude of the most of the people. They would rather buy a new clothes than to wear all over again those antique clothes. We "recycle" those old clothes in making stuff toys, a door mat, as mentioned here rag for cleaning, among others.
I usually use old clothing to mop the floors and just basically clean the entire house. I find that most of my clothing cloth is very good at that sometimes even better than the cleaning towels I purchase, this sure saves a lot of money on having to change my mop constantly. I also use them to make diys to save money on different items, and I also find it fun.
If they are too old to be donated I will cut them up for rags..or sometimes just throw them away. It really depends on what it is. I can usually use rags though. Old towels and blankets can be donated to animal shelters. These are some good uses for these types of fabrics.
I have different use for different discarded used clothes. While I prefer to give them for charity purpose like I gave almost 30-35 clothes to a lepers' home in December last month. As the @Decentlady mentioned in her post my wife also use them for different purposes in kitchen and for dusting purposes. In fact, we can save a lot of money if we use them for several daily needs.
We have a neighbor who knows how to make potholders using old clothes particularly shirts. When we have many old clothes to discard, we give them to that neighbor as raw material for her business. In return, she gives us some of her products. That's the reason why we have a surplus of potholders now.
You reminded me that we can get our old cotton or woolen clothes into home spun rugs or bed sheets for rough use. The expert weavers either exchange the old clothes 3 kg old clothes +$1 for bed sheet or rug each. In case you insist that you want the sheets made of your own old clothes then they deliver the items within a week or so.