Place a children's plastic wading pool on the ground where you want the finished waterfall. Use a shovel or spray paint to mark the shape of the pool on the ground. Remove the pool.
Dig a hole in the ground the same size as the marked shape from the prior step. Dig the hole the same depth as the wading pool. Insert the pool into the hole. Fill any extra area around the pool with soil.
Place a layer of rocks and stones in the bottom of the pool to cover the plastic. Secure the stones in place using plumber's caulk. Stack the stones and rocks up the side of the pool to cover the sides. Secure them using more plumber's caulk.
Stack rocks and stones on top of one another to create a structure for the waterfall. The height and width depends on what you want the waterfall to look like. The higher the structure, the further the water falls. Secure the rocks and stones with plumber's caulk.
Leave the plumber's caulk to set overnight.
Insert a store-bought waterfall kit into the base of the pool. Follow the directions for the kit's setup, since different kits require different steps. Find a kit at your local garden supply or home improvement store.
Fill the reservoir with water and turn the waterfall on.