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It depends. If it is going to be washed often, then I would use Wonder-under or a similar product before stitching the edges. That is a double sided fusible that your fabric store can (or should!) help you with. Apply as directed, then stitch. For something that will get lots of laundering like a child's shirt, do the Wonder-under, then seal the edges with fabric paint. You don't need to edge stitch then. Alternatively, stick the applique down and satin stitch on the sewing machine (most durable). If it is a wall hanging or similar, then no edge finish is needed.

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