Small Bath Towel from Walmart: $1.50
Small Washcloth from Walmart: $0.50
First take your small washcloth and fold in half. Sew one end together. I recommend that you fold the other end over [see below]. It will add a little more character to your finished towel.
Next, put right sides together and pin the washcloth (where your two corners met and were sewn together) to the middle of the longest edge of your small bath towel.
Continue to pin, the edges of the washcloth and towel together. [Don't forget to keep the opposite end of your washcloth folded over.]
The last step is to sew! The best part is that you're sewing a straight line.
If you'd like you can add ribbon, ric-rac, or other embellishments. It would be darling to embroider the baby's name on it as well!
Now all you need is a cute little baby to snuggle in your DIY hooded towel!