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Riddles have been popular across both time and culture. In their poetic form, they rose to prominence in the Victorian era. Each line of the rhyme supplies clues to a letter, which together spell out a word whose meaning is given in the last line of the rhyme.
Each of the 'letter clue' lines will take a form along the lines of: 'My first is in DIGIT but never in TOE.' 'My first' refers to the first letter of the answer word. And the clue is telling you that the letter appears in the word DIGIT, but not the word TOE. This leaves O and E as possibilities. From a compiling point of view, the objective is to find witty links between the two words and also to ensure that there are neither too many nor too few differences between the two words.
The best approach is to work through each of the lines in turn, identifying the possibilities for the letters in first, second, third, etc place in the answer word. Looking at the possibilities as a whole, while considering the clue to the answer word in the final line, should help you to eliminate more letters and work out the answer.