One of the first questions that must be answered when starting any design is “How much time do I want to devote to this project?” Time limits many design options. If you want something to give tomorrow, there’s no way a large elaborate design will work. If you want beautiful lettering, an intricate image, subtle shading, you’re not going to get it in a bookmark you can complete in an afternoon.
I want to stress here that bigger, time-consuming designs aren’t always better. It can be hard to sustain the effort needed to make it to completion. It is dispiriting to start with high hopes for a project and end up with it sitting half-finished in the closet. It’s best to pick something you can encompass.
Also, you need to consider how the person you are making it for will use it. A big framed piece may not work for everybody. Cat wrote:
I would like something small she can keep in her room, or in a memory box as she matures.
Small size means we need to look at trade-offs between length of verse, simplicity of lettering, and size of stitches. If you’re willing to work very small stitches intricate words are possible, but will take time.
Cat, I had an idea which I’m not sure if you would like. How about stitching a book? Maybe a book cover that would hold photo pages. Or maybe a book that you could add to over time, and maybe even other people would stitch pages for her? She might even add to it herself in time. It could be bound with ribbons, and the edges whip stitched.
So, what we need to figure out is how elaborate a project do you want? I can do embroidery bookmarks that will take a couple of hours:

Insp Unfailing BM, a photo by Carmen CS on Flickr.
I can do 5″x7″ 10 point designs which might take a weekend:
Rheba Flamingoes, a photo by Carmen CS on Flickr.
And it goes up from there…
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