My original plan was to use natural dyes, such as onion skins, nettles and chamomile to colour pieces of an old wool blanket but I've decided to postpone this until the children are a bit older. Instead, we used Kool-Aid, the low-effort route that made the most amazing, bright colours. If you're in the UK and you've never heard of Kool-Aid, it's a US drink powder that comes in lots of different flavours. I bought mine on-line from here. It's great fun and very easy to use, plus it makes your house smell like a sweet shop!
An old wool blanket pre-washed on a hot cycle, cut into squares - ours were 20 - 25cm square
Sachet of unsweetened Kool-Aid in various flavours - 1 per square
2 large bowls for soaking
A wooden spoon
Method (for one square)
Soak the blanket square in a bowl of tap-hot water for 15 minutes.
Remove the soaked blanket piece, squeeze any excess water and add it to the Kool-Aid mix.
Transfer to a saucepan and bring to a light simmer.
There should be enough liquid to cover the square and it doesn't matter if it's not totally flat, but it should be fully submerged.
Simmer, with the odd poke for 10 mins or until the water is clear (with some flavours it turns milky)
Drain using a sieve and rinse in cold water
Peg onto a washing line until completely dry
Here's a colour chart showing the colours and flavours: