Nothing feels better than terry cloth after a swim, and a towel poncho is everything that a towel is not: It will not require one hand to hold it when its wearer is eating ice cream, and it will not unceremoniously unwrap.
Bath towels look chic on big kids, and hand towels are winsome on the not so big. For toddlers, use buttons that are 1 1/3 inches or larger (long strings are a choking hazard for kids under 3).
Fold towel in half so ends meet; cut a half-ellipse (for neck) in center of fold and a 3-inch-wide ellipse to the right of it; open towel.
For kids 4 and up, make tie closure: Finish edges of large ellipse with double-fold bias tape, then finish small one, leaving two 15-inch tails. For kids under 3, make a button closure, using two buttons no smaller than 1 1/3 inches in diameter. Start tape at center point and cover smaller ellipse, then larger, leaving 3-inch tail. Loop tail and stitch down; place buttons on opposite sides of fabric so holes align; stitch together.
Cut pocket from a washcloth; finish sides and bottom with bias tape; fold top under and hem. Sew onto poncho.