Cut a length of the yarn (the more full you'd like the tassel, the longer the length you should cut). Thread it onto a tapestry needle.
Pinch the tip of the hat with the middle finger and thumb of your non-sewing hand.
Bring the needle through the tip of the hat, over the top of your index finger and back through the tip of the hat.
Repeat this, making as many loops as you want (I made 5 loops).
Then tightly wrap the around the base of the loops a few times.
Bring the needle up through the center of the tassel.
Trim the tassel to whatever length you desire.
The hat pictured above is our sweet, little, cotton Pointy Hat for Newborns.