
Here is a cute idea from the M & M's website:
Memory Book
Create a new tradition by making a memory book together with your kids. Then update it once a year as a mini time capsule keepsake.
Prep time: 30 min.
Difficulty: Challenging
What you'll need:
    * Felt
    * Construction paper
    * Yarn, string, thread or cord
    * Needle
    * Scissors
    * Glue
    * Crayons, markers or colored pencils
What to do:
   1.
      Cut felt or paper to the desired size (these will be the pages of the memory book) and bind by sewing with yarn, string or cord.
   2.
      Glue-in pieces of construction paper or felt to create pockets for keepsakes and souvenirs.
   3.
      Each year, a new "chapter" is created, items and information are added to the book, and parents and kids can look back on their past year's experiences.
Makes 1 memory book. 
We did these when the boys were younger and they are very cute.
http://brightideas.com/summer/family/f_191_1.jsp
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