Attach a balloon to a water bottle (or a you can use a tap) and fill it up with water
Tie the balloon in a knot. The balloon might be wet and slippery, so make sure you don't drop it!
Cut the end off the balloon - but make sure you leave the knot in place
Cut the end off a new balloon
Squeeze the water-filled balloon into the new balloon
Cut the end off a new balloon, and squeeze the balloon in again
You can continue layering more balloons to make it stronger and bouncier. You might need a friend to help you though, as stretching the balloons can get tricky.
For the final balloon, don't cut off the end.
Stretch the opening, squeeze in the water balloon, and then tie a tight, final knot. Once you're done - cut off the rest of the tail.