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Cut a square of terry cloth fabric, making it the size that you would like your towel (smaller squares for newborns, larger squares for toddlers). Cut a triangle for the hood part of the towel.
Cut the corners of the square to make them rounded. Do the same for the larger angle of the triangle.
Serge along long edge of triangle.
Sew decorative trim (grosgrain ribbon, rickrack, or something similar) to right side of long edge of triangle hood.
Pin the hood to the square, matching edges of fabric….wrong side of hood pinned to the right side of the square.
Serge completely around the outer edge of the square, joining hood triangle to one corner of the square as you sew.
Any left over fabric can be serged for a matching washcloth.
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