A few years ago a ranch I worked at had kids paint their horses as a kids event. They used paint markers which were like a cross between a crayon and a paint. They sort of had the consistency of a chocolate bar that's been in the car on a hot day. They were sort of melty and mushy, which means kids could smear them on the horses without too much effort. You could also use sidewalk chalk that has been wetted a bit. The paint-markers were non-toxic and washed off. They could be/were purchased in a children's toy store or the writing/drawing section of a larger store.