I stumbled upon this idea from A pair of Pears for DIY clay monogramed tags and ornaments that is truely brilliant. It looks quite easy to do, and one that the children would enjoy helping out with.
To make these tags the exact same way, you'll need the 'letterpress cookie cutter set'. The letterpress cookie cutter set is readily available. If your here in Australia, I found this seller to be the cheapest for the set. Alternatively, you could make them using kids play dough alphabet cutters or any other cookie cutters.
Happy gift tag making!!