Water proof towel?

Just double a towel up -- they don't pee enough at one time to soak through multiple layers of toweling. If you want to make pads, get a plastic tablecloth, cut it into smaller pieces, and sew the towels to it.

I use washable incontinence pads during lap time. You can buy the same material at most fabric stores to make your own.

The waterproof material I use for my cloth diapers is PUL. I made a few lap pads with the PUL on the bottom, and they work awesome.

Couple places I buy PUL from.

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If a fabric was waterproof, it would not be a "towel".
What you want is vinyl or a cut-up plastic shower curtain at the dollar tree.

I used a changing pad that I used for both my babies. I just cut it in half, than one side was fleece the other side minkee. It does a great job.