A paper plate, wooden dowels, string, a needle and a magnet come together to make a nifty hanging compass.
The first step is to magnetize your needle. Lay the needle on the table and then place the magnet on top. The needle will want to jump to the magnet. Next, slide the magnet in one direction only along the needle. Make sure to apply some pressure to the magnet as you slide it along the needle all the way past the end. Lift the magnet up and away from the needle. Bring it around and start over again and again. This needs to be done about 50 times to ensure it's properly magnetized. Test to see if it's magnetized by touching it to another metal object, such as a paperclip. If it sticks you're ready to make the compass, if not keep rubbing it against the magnet.
Once the needle is magnetized, punch four small, evenly spaced holes onto a paper plate, and stick in the wooden dowels and tape them together at the top. Then, tie a piece of thread to the needle and hang it down so the needle hangs above the plate, but doesn't touch it. The needle needs to be level over the plate. This is the tricky part. Now it should spin around and move towards north.
