How about a simple pencil case, using a felt square... divide into three, fold up one third, and blanket stitch the sides together, then embroider the flap with flowers (lazy daisy stitch) running stitch and/or back stitch for stems. Cut a hole for the button (no need to do buttonhole stitch as it will not fray) then sew on a pretty little button. Job done!
Are you able to access sewing machines? If yes, then cheat's bunting - cut out the triangles of fabric with pinking shears and sew them onto tape.
Does that help to start you off? Try and aim to have an item that they could finish at their first session... makes parents v happy
My DD went to sewing club in Y2 - I think a pencil case is a bit ambitious TBH, lots of the children will never have held a needle before. They just practised different stitches on binka (oh god that isn't what it is called is it? That stuff with holes in!) to begin with, then used them to make a pattern and produced a binka bookmark. You will probably spend most of the time threading needles.
Binka bookmark is a good idea to start with. However, it would be worth checking what they've done before. Our Yr2s used to make bookmarks for Mothers day every year. The first thing you will need to do is teach them how to thread needles and pull the thread through far enough that it doesn't unthread on the first stitch!
How about sewing s few buttons on to a piece of felt as a decoration and then joining two pieces of felt together and stuffing, to make a pin cushion? That way, you're doing something which will develop practical skills (sewing buttons on)' and making something useful.