I will do a very short step by step beginners guide here but if you want things in detail shown to you, including examples and results check out the video version of the guide below.

1. Find out if your club is currently good enough to develop youngsters. Do that by checking out training facilities and youth facilities. Secondly check out your coaches. If you have bad facilities and/or coaches it’s going to be very hard for your players to reach their full potential.

2. You can improve your facilities by asking your board and you can hire better coaches. But if you start out in a very bad situation, which is often the case if you do low league saves it usually going to take a couple of seasons before you have gotten everything up to a good level.

3. Tutor your most promising youngsters. (see the video below for a lot more info about how to tutor, what tutoring does and who is a good tutor).

4. The most important thing is for the youngster to get a lot of first team experience. A good way for him to get that if he is not ready for your first team yet is to loan him out after you are done with the tutoring. When you loan a player out make sure to only loan him out to clubs where he will be playing a lot of games. If he is going to be a backup player sitting on the bench he might as well stay in your club since you probably have better training facilities and coaches. (more on this in the video).

5. Have him play for your first team squad as young as possible. The first season maybe as an rotation player who often come off the bench and who starts most cup games. And for the second season he should be playing most games. If he can’t get a spot in your team go back to step 4 and loan him out, preferable to a club that play as high up in the league system as yours.

The video guide that goes throw everything in detail including examples:

I know there are a lot of experienced managers out there, feel free to share your best advices on how to develop youngsters in the comments below!