After trying a few different ways I decided to use thicker dark blue sock yarn to sew the handles on at the edge of the opening, about 1,5 cm from the edge. These are the stitches that hold the handles in place so I stitched these ones firmly and rather tightly.
I used the same unspun yarn I knitted the bag with to cover the stitches sock yarn stitches.The unspun yarn is there just for cosmetic effect and can be sewn on a bit more loosely. Unspun yarn alone does not have the strength to keep the bag in piece as it tends to break easy.
This bag is the second in my series of more down to earth purses. I love it, the color is so rich and beautiful, I found it didn't need any embroidery at all. The dark wood handles work so well with the teal, I thought adding embroidery to it would be like adding salt on bacon, completely unnecessary.