In a saucepan over medium heat, melt butter. Add sugar and water, stirring until sugar is dissolved. Bring to a boil and remove from heat. Stir in vanilla extract.
Pour mixture over caramel bits in a bowl. Stir until well coated.
Place mixture in the refrigerator for 30 minutes, or until firm.
Using a spoon or your hands, form mixture into small balls.
Store in an airtight container in the refrigerator for up to 2 week
Notes
If you find that the caramel balls are too sticky, you can add more sugar to the mixture.You can also add other ingredients to the caramel balls, such as chopped nuts or dried fruit.