Here's a quick and easy tutorial on how to make a compass out of a paperclip. All you need is a small cup of water, a leaf, a metal striker such as a file or pocket knife, and a paper clip.
#1 Bend or cut paperclip down to the size of a needle
#2 Strike paperclip towards the point 50 to 100 times in the same direction. This should magnetize the paperclip.
#3 Place the now magnetized paperclip on the leaf, and after a few seconds, it should give you true north!
Here's the tutorial on this compass and some more awesome uses for paperclips!