The easiest way is for you to do what I call a frey applique...you sew on the fabric letter using either a straight or zig zag stich about 1/4" on the inside border of the fabric (you are sewing on top of the fabric, not the tee shirt). After you wash the garment a few times the edge of the applique will frey slightly giving it a fun and funky look. I am including a pic of an outfit that I just did using this method for my daughter's ninth birthday.
This is a really quick and easy way to do applique & the best part of it is that with this method your sewing doesn't have to be perfectly straight and even. My daughter has even been able to pull it off!
Hope this helps...Krysta