I loved the simplicity of the instructable for the Most Simple Homemade Boat and decided to try my own version.

Step 1: Materials and Tools

Materials

A piece of styrofoam from your recycling bin
Paint
Straw
Balloon
Elastic band

Tools

Utility knife
Sharpie
Drill (or something to dig a hole through your styrofoam with).
Paintbrush (sponge applicator works well)

Step 2: Shape Your Boat

I started out with a 2" by 9" piece of styrofoam from YuKonstruct's recycling. You can use any size or style of foam (as evidenced by the instructable that inspired this project), but I liked the thicker stuff so that it could be shaped quite nicely into a boat.
I drew the basic boat shape that I wanted onto the piece of foam.
Rough out the outer shape with a utility knife.
Hollow out the centre of the boat.
Smooth all of the edges as best you can and shape the bottom of the boat. The only thing to be careful about here is to make sure that you don't cut a hole through any of the parts of the boat. You want it to float, so make sure to have a good sized edge on all sides.

Step 3: Paint

I used a sponge applicator to paint my boat. The sponge worked better than a brush because of the texture of the foam - but either would work. I painted it yellow on the inside, red on the outside and a blue edge.

Step 4: Motor

Bore a hole through the back of the boat that is just large enough to fit your straw through. You want quite a tight fit.Cut the straw so that it hangs out about an inch on either side of your boat.
Attach a balloon with an elastic to the straw - the balloon will be on the inside of your boat.
Insert the straw with balloon attachment into your boat.

That's it! blow up the balloon through the straw, pinch the end, then let it go when you set it in water. The bubbles created by the 'motor' and the propulsion will delight your child.