I got this craft project idea from the daycare center my children attend. Over there they have the yougner kids do fingerpainting with not only non-toxic paint, but edible paint!
Their recipe is quite easy.
Jello ( or store brand) packages ( all the same color/flavor)
Boiling water, less than for eating Jello.
Boil the water and add it to the jello powder in a bowl, until thick consistency. It might not be dissolved entirely and it is OK, it adds texture!
Add ice to cool, it will get thicker too.
Repeat for each color.
Let the kids have fun and you'll have a nice smelling paint with a sandy texture!