Here's what the manual says:

Before sewing, fit the button-hold foot to the machine (long white plastic thing with red, ruler like markings).

Select the pattern selector dial that is solid green on the left hand side. Set the dial to "1" position. Sew the left side and raise the needle.

Select the pattern selector dial that is solid green on the top and bottom. Set the dial to "2" position. Sew 5-6 stitches and raise the needle.

Select the pattern selector dial that is solid green on the right hand side. Set the dial to "3" position. Sew the right side. Raise the needle.

Select the pattern selector dial that is solid green on the top and bottom. Set the dial to "4" position. Sew 5-6 stitches and raise the needle.

Hope that helps...

You will notice that there is a dial to make button holes. Yes, use the template and turn the nob to form the four sides of the button hole. Try it on a scrape of fabric until you figure it out. That is what I do. Good luck!

Trudy