Cut off the legs of the jeans where the holes are at the knees. Turn the pants now shorts inside out and fold edge about an 1 inch, this will give the edge of shorts to look the finished look. Pin in place to hold edge together.
Find matching ribbon. I ended up using some ribbon I had on hand that was double sided. Cut ribbon into 2 1/2 inch strips, fold in half and pin around the edge of the bottom of the shorts. Make sure the ribbon is hanging off the shorts so when you turn them right side out the ribbon will showing and not hiding inside the shorts. Leave a little grab between each ribbon strip. The amount of strips will all depend on what size of pants/shorts used. I used size 3T pants and ended up using 18 strips of ribbon for each leg.
Sew a straight stitch around the edge of the ribbon. I decided to sew two times around for more durability. Plus I liked the effect too!
This pair of shorts I had to doctor. The hole was above the knee and so I made a patch with the jean leg I cut off. Not to bad if I say so myself.