Shepherds are the simplest and so best to tackle first. Two rectangular pieces of cloth can be used to form the robe, attaching one round the neck with string and the other over the head, also with string. Striped fabric is traditional here and any string that shows makes the shepherds look like poor working men.
A kebab stick (or better still a straight twig) with a wire tag twisted onto it at the top and then bend into a hook shape, makes the shepherd's crook. Cut a small nick in the robe to hold the crook in position.
Draw only a suggestion of a face. Be careful with this, as attempts to draw too much detail can make the characters look clown like and so inappropriate.
Later the children might like to make sheep by sticking white paper scraps or cotton wool on a cork into which you have pushed match stick legs.
Mary and Joseph are made similarly, Mary customarily in blue and Joseph without a crook of course. A suggestion of a face drawn on Mary and Joseph, makes the two characters appear to be looking down at the Baby
Baby Jesus is a brown paper bag rolled tightly and held by sticky tape or a small piece of string. A suggestion of a small sleeping face is added and the Baby is wound in white swaddling clothes.
The manger is three rectangles of cardboard cut from a box. One is folded in half and allowed to open slightly to form the cradle shape on which the Baby sleeps. The other two each have a V shape cut out of them to support the first rectangle and to form the "legs" that support the head and foot of the manger crib. Secure with sticky tape. I cut the front legs shorter for a better view of the Baby.
A box can be the the stable building, coloured with wax crayons to show stones, bricks, plants.
The three kings have the same body pattern, but use richer fabric scraps to dress them and shiny ribbon or rich fabric strips to secure their clothes, whereas string was used for the poor shepherds
Their head piece is made of a bigger fabric scrap than the shepherd's, so that it extends to make a train, which may need to be tucked at the back with a staple or a stitch, but, when stretched out, helps the king to stand up. Kings might need extra standing support as their costumes are heavier.
Shabby stains on the fabric scraps have been disguised here by adding each king's initial on the garment where the stain was, with a felt pen.
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Add a gold or silver crown, maybe with fabric jewels to match each outfit.
Later the children might offer to make the presents to put by the kings. Maybe someone will want to make a camel!
Don't forget to make a star ! That is fun to make too.