Michael's (I had a 25% off your entire order coupon!!). I got six unfinished wooden blocks (about a dollar a piece) and some scrapbook paper (wound up being about three dollars) in colors that went with the nursery color scheme. I got solids and patterns to add more interest. I cut squares slightly larger than each side of the blocks. I then laid out the squares and decided which color letter I wanted to put on each one. I cut out the letters with a die cut machine. If you do not have access to anything like this then you can paint the letters, use markers or use letter stickers.
I tore the edges of the squares to give the blocks more of a distressed look. I then decoupaged the paper (using homemade decoupage) onto the blocks followed by the letters. (check out how to decoupage...it's SO simple) It did take a little bit of time to complete, waiting for the decoupage to dry so I could turn the block over and do the other side. Though, I think it was completely worth it and costs less than $10!