Plan your gap year finances

Published:
03 August 2010
Topic:
News,Money,Travel,Credit Cards,Travel Money,Student finance

Tens of thousands of people are taking time out to travel the world before they start university, but make sure you plan your finances as carefully as your route.

According to the Universities and Colleges Admissions Service, around 34,000 students are currently on gap years before they take up their university places in autumn this year, and a similar number is expected to defer their entry this year.

But taking a year off doesn't come cheap - the National Union of Students estimates that the average cost of gap year travelling for people aged between 18 and 25 is somewhere between £3,000 and £4,000. Here, we look at ways to fund your trip and how you can ensure you are financially protected while you are away.

Save as much as possible in advance

Most people will need to save up a large amount of cash before they can think about jetting off.
 
Whether you're signing up to a gap year scheme or you're going it alone, you'll need to have plenty of money available to pay for your gap year placement or to book your round-the-world ticket.

Draw up a daily budget and look into how much spending money you will need for food, accommodation and transport. Remember to add some extra cash in case of emergencies.

Be realistic about how long you can afford to be away for. It's better to stay at home to work and save for six months and then have six months abroad free of financial worries, than to travel without enough money, struggling to make ends meet.

Gap placements

If you are going on a placement with a specialist gap year company, the independent website GapAdvice.org has an excellent gap year spreadsheet to help you work out and compare the costs of different schemes.

Before you hand over any money to a gap year placement company, make sure you're confident it is genuine and will provide you with the experience advertised. Ask to speak to returned 'gappers' to hear their feedback, and, if it's a paid-for volunteering opportunity then find out exactly where your money goes.
 
If you're planning to spend your time working for a good cause through a charitable gap year scheme, you may be able to fundraise for your costs.

You could try writing to local businesses to see if they would like to support you or ask your old school to help you run some fundraising events.

Best homes for your savings

While saving for your trip, you should keep your money in a competitive easy access savings account - or a cash individual savings account (ISA) if you have yet to use your tax-free allowance this year - so that you can earn as much interest as possible before you go.

Current best buy cash ISAs include Nationwide Building Society's e-ISA which pays 2.75% on a minimum investment of £1 and Halifax and Bank of Scotland's ISA Direct Reward accounts which both pay 2.60% on a minimum investment of £1,000. The Nationwide rate includes a 1% bonus until the end of June next year.
   
If it's an easy access account you are after, then the ING Direct savings account is currently paying 2.75% on a minimum investment of £1.

Sort spending money in advance

Are you planning to just use cash, rely on plastic, or use a mixture while you're travelling? It's worth taking the time now to plan your spending money, because this could save you a fortune once you're abroad.

Shop around to find the best price for your foreign currency - you'll almost always find the best price online.

When it comes to using plastic, most students wouldn't be eligible for a credit card, and should avoid them anyway to prevent running up debts before university.
 
Nationwide's FlexAccount Visa Debit card is the best debit card to use abroad, as it currently doesn't have a foreign usage fee in Europe and charges just 1% elsewhere. But from November 1, these fees will increase to 2% for all overseas' usage.

As an alternative, pre-paid cards are definitely worth considering, especially as many of these don't charge fees and offer competitive exchange rates - check out our article 'What is a prepaid card?' for a rundown of some of the best deals.

 

Take out comprehensive travel cover

Travel insurance needn't be expensive and it gives you real peace of mind that you're protected if something is stolen, your flights are delayed or something more serious goes wrong and you need hospital care.

Compare travel insurance policies to find the best deal for you, but don't just pick the cheapest - you want to be happy with the level of cover you're receiving too.

Remember, if you're doing anything particularly extreme during your gap year adventure - think skiing, kayaking, sky-diving and so on - you'll need cover that includes adventurous activities.

If you're travelling within Europe, pick up a European Health Insurance Card from the Post Office or online via the site http://www.ehic.org.uk/. They're free, but carrying one entitles you to free or reduced-cost emergency treatment in 27 EU countries.

These cards should not be seen as a substitute for travel insurance, however, as they won't provide cover should you experience issues with lost baggage or cancellations or need repatriating back to the UK.

Before you leave...

Give a parent or trusted family member a note of your bank account and credit card details while you're away, so that if you do need emergency funds or lose your cards, they have the information handy.

You should also leave a photocopy of your passport with them.

Tell your bank or building society and credit card provider that you're heading abroad, so that they don't freeze your account.

Stay safe while on the move

Once you're travelling, you'll want to keep your cards, money, passport and tickets as safe as possible. Most hotels and hostels will have a safe deposit box, so you can keep valuable items securely locked away.

Invest in a money belt that you can wear beneath your clothes and then any money you do carry with you is safely protected from pickpockets.

Be especially careful in crowded spaces, especially on public transport. When you're using an ATM, take extra steps to shield your PIN.

Planning pays off

This list of things to plan and do may be long, but you'll enjoy your trip more if everything runs smoothly thanks to a bit of forward planning.

A gap year is a once-in-a-lifetime experience and the last thing you want is an avoidable financial problem curtailing your trip or spoiling your memories of an epic adventure.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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