Mix 2 cups of water and 1 cup flour in a large bowl to make the paste. If you need to make more for your pinata, always use two times the amount of water as flour.
Cut old newspaper into shreds. The shreds should be about 3 to 4 inches long and about 1 inch wide.
Blow up a round balloon until it is nearly full. The bigger the balloon, the bigger the pinata will be.
Coat the shredded newspaper with the flour mixture and place them around the balloon. Make sure to smooth out any air pockets. Continue this process until the whole balloon is covered with about three or four layers of newspaper. Let the balloon dry overnight.
Decorate the piñata with crepe paper. Select a color that matches your event. For example, use orange for Halloween or red, white and blue for the Fourth of July. Attach the crepe paper with small dabs of glue. Allow it to dry.
Cut a small hole in the top of the pinata that is only big enough to fit the candy and small toys into. Once you have the candy inside, cover the hole with some crepe paper. Make another small hole so you can attach a string to hang it by. Make sure the string is tight and secure.