Remove the shoelace from the shoe and replace it with the piece of baby yarn.
Take the same material and create another sideways loop to pull your first loop through, just like a shoelace.
The Shoelace Book by Burkard Polster is another good resource, offering information on the various strengths and weaknesses of different lacing patterns.
Kids this age can also string large beads or buttons onto a shoelace or large string, so it might be time for the child's first real craft project!
They can fasten visible buttons (as opposed to those at the back of clothing), and many can tie bows, including shoelace bows.
In this case, wrap the sash around the waist, and cross one end of the sash under the other, as if you were tying a shoelace.