If you're really on a budget, any ordinary knitting yarn and sewing thread would work here, but chances are you already have poly yarn, thread, and a bobbin on your desk ready to go.
Additionally, an optional final step is using glue to secure the wraps. Superglue is cheap and easy to work with, and should already be a part of your tying kit. If its not, make sure you buy the bottle with the brush on applicator, its far easier to use and will have a far longer usable lifespan than the applicator tip.
You can use any yarn you want, but be warned that many yarns (such as wool, cotton, and acrylic) will wick up water and become a sinking mess. Poly yarn is water resistant, and will accept paste floatant happily and hold onto it. The colour choice is entirely subjective, but I find myself preferring orange yarn as its much easier to pick out. Yellow, white, or red, whatever colour or even blend you find easiest to pick out is just as possible here. Additionally, a few strands of Krystal Flash can be worked into the indicator to provide a little extra sighting cue.
Wrapping thread around the middle.
The next step will be to wrap thread around the middle of the thread. I find its easiest to start by taking a few wraps by hand, and then simply holding the yarn in opposite fingers, and twirling the thread around the yarn. This has excellent coverage ability, and will fix the thread on it nice and tight, ensuring that the next phase will find a solid base. Again, any thread colour is possible here, so use what you feel works best. You want to ensure you keep it tight as it'll let the looped leader/tippet maintain a tighter hold.
Fold, wrap even more.
Once you've got the middle portion completely covered with thread, you'll want to fold the yarn in half, ideally so the tops of the thread covered portion meet up and the whole thing forms a nice U. Because of how tightly you wrapped the thread in the last step, you'll find that there's a nice little eye formed in the indicator now. Simply wrap the thread around both sides of this U, binding the two parts together into one solid post.
Whip finish, cut off. Cement.
Finally, whip finish your thread off once you've got the two sides bound down closely and tightly, leaving only a small hole to pass your leader through. Snip off the thread, and apply a bit of glue or laquer to the knot to preserve it a bit longer. Trim the excess fuzz off the top, and muck it up a bit with your finger. That's all it takes. You can put a leader folded over through the hole, then loop t over the top of the indicator to hold it in place, or if you're finding that forceful casting is causing it to slide up the leader, you can pin it in place with just about any small twig from the shore.
These indicators will require the occasional use of a bit of paste floatant (ie, Gink) int hem from time to time. You'll find that if they start to sink, just wringing the water out should give them a bit of life, and really grinding the Gink into the yarn will help it even more so.
Unfortuantly, the biggest downside is that if ice is forming on your guides, a yarn indicator is doomed to fail. You're going to need to purchase or come up with a different solution, but if you're looking for a quick and easy indicator that costs next to nothing, try out a yarn indicator.
(pictures at http://lvlimestoner.blogspot.com/2011/03/yarn-style-indicators.html )
