This is just a general how-to, not an in depth one as it should be easy enough to make and modify to suit you. I used babybamboo yarn (which actually calls for a 4mm hook) which is fantastically soft and wonderful... if somewhat expensive but there's more expensive so...
Use whatever thinner yarn you have handy. The softer the better as it will be close to your neck.
The charm is from a 4-pack from Walmart. I believe it was $4.

A note about yarn:
* Baby / Fingering Weight: A very light-weight yarn used for baby apparel, socks and other delicate items.
* Sport Weight: A medium-weight yarn used for baby apparel, sweaters and throws.
* Worsted Weight (or Knitting Worsted Weight): The most popular weight of yarn used for sweaters, afghans, pillows, and craft projects.
* Chunky Weight: Heavier than worsted, chunky yarn is used for hats, scarves, sweaters and afghans.
* Bulky Weight: A very heavy yarn (twice the thickness of worsted weight) that is used for similar items as chunky yarn and works up very quickly.

What does "double knitting" mean?
Double Knitting is actually a weight of yarn like worsted, fingering or sport. It knits at a gauge of 5.5 stitches to the inch. It does not mean that you are required to knit with two strands doubled together at the same time.

from Patons