Teaching students how to use a reel can be both fun and challenging to say the least. The most common problem students encounter, many experienced divers for that matter too, is how to keep the reel from getting tangled up or getting fowled up. The biggest problem I've encountered with students who tend to foul up reels is not keeping the line taut. It's important to emphasize the need to keep just enough tension on the line to prevent the line from tangling on the spool. Another culprit is guiding the line smoothly back onto the reel as the diver reels it in. Be sure to show and reinforce the proper technique for guiding the line back onto the reel as they wind it in. The most common way to do this is to use the index finger to move the line from left to right, back and forth to keep it even on the spool.
Next, find a large enough space to practice in. I like to use densely wooded areas to teach proper reel use and handling. However, if you live in an area devoid of trees, a parking lot, preferably a grocery store with lots of shopping carts, works very well too. Point is, you need a large area so they can practice, and be creative with your space. If you must use a parking lot with lots of shopping carts, set them apart at least 15ft away from each other and preferably in the shape of a ship or some other object your students will most likely dive, to add some realism to your practice drills. For the demo, I like to have the students follow next to me as I demonstrate proper use of the reel as I simulate entry and then exit from a structure. Then I have each student practice solo until they get the hang of tying off the reel and reeling it back in without tangling or jamming it. I then have them practice leading a team into the "structure" and then back out with each student getting an opportunity to lead the rest of the team of divers.
This is not only effective, its also fun for the students and helps build a lot of confidence before practicing these critical skills in the open water environment. The real test is when they have to do this blind folded to simulate silt outs. Don't forget to have them wear their gloves, if applicable. You can create more fun by creating teams and challenging them to some friendly competition.