This is the easiest secret compartment project I know of. Depending on the depth of the hole, you can store a $20 bill, short message or anything that will fit.

Supplies

1 pencil
3/16 drill bit
Drill or dremel tool

Step 1: Remove Metal Eraser Cap

Carefully pull off the metal eraser cap. Grab it firmly and wiggle it a little as you pull. It takes a little effort but it will pull off.

Step 2: Drilling the Concealment Hole

Use a 3/16 inch bit and drill a hole in the center. Any larger size drill bit and the wall thickness will be too thin. Drill an inch or more depending on your needs. A lathe works best for drilling but a hand drill or dremel tool will work fine. Even a finger powered hand drill will work.

Step 3: Fitting the Eraser Cap

Align the small crimps in the metal to the original position of the cap. Push on till the cap is back in place. Pull on and off a few times to create tiny tracks in the wood. The cap should remain snug for several 100 removals. Eventually the tiny tracks will wear out and the cap won't stay on very well. That's when you make a new one. Another 10 minutes!

Step 4: A Finished Secret Pencil

This project took less than 10 minutes. Have fun!
Secret Pencil tip. Make one from a shorter old pencil with a broken tip. Keep it with several new pencils that are freshly sharpened. No one will want to "borrow" an old broken pencil.