An idea for grandma would to be to make a "hand bag." Buy a canvas tote from a craft store (about $5). Then help your toddler make prints with liquid acrylic paint (FolkArt, Ceramcoat, Apple Barrel, etc.) Your child can choose the colors. Then on the flip side (or above the prints), you paint/write "Grandma's Handbag."
You could do a sweatshirt full of handprints for grandpa. Same idea. To make the liquid acrylic permanent, just heat set it with an iron once its air-dryed.
It's not necessary to add any "fabric medium" to the paints for this type of craft.