A couple Sunday's ago was Grandparent's day. We made an easy and inexpensive gift for each of the grandparents, and just a couple days ago this gift for our neighbor's birthday. At target I picked up a four pack of tea towels for $3.99. The kiddos drew a picture on a piece of paper. (Mr.-1yr-old scribbled, and I traced his hand right in the middle of the scribble). I placed a tea towel on top of their drawing and with a sharpie marker I traced it (the tea towels are thin enough to see the picture "well enough" through it). I washed it afterwards and it faded a tad bit, but still looked very nice. We wrapped them up with a few dish cloths and a done!
Thank you to http://www.settingforfour.com for this great idea!