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Gap Year Budgeting

Although taking a gap year trip may seem exciting and a chance to take a break after all the stress of A levels or a degree, it also requires some careful financial planning if you don’t want to end up spending a lot more than you can afford. 

It could mean you have to return from your trip earlier than originally anticipated, or even worse, stuck in a foreign country with no money!

One of the first things to do is to look at the living costs for each country you’ll be visiting.

If you’re going to the USA, this part of your trip will be much more expensive than when you go to Asia or Australia, for example.

This will give you an idea of the costs involved for each part of your trip.

Some gappers decide to spend the first part of their trip in the more expensive areas of the world, such as the USA and Europe, and go to cheaper places such as Thailand and India later on when their funds are running low.

Next, draw up a list of pre-departure costs. These include:

Plus any expenses on the road, e.g. food, accommodation, souvenirs, excursions, etc.

Check out Lonely Planet’s Thorn Tree travel forums for advice on current prices.

You can also obtain current estimates of daily food and accommodation costs at lonelyplanet.com/destinations.

Be careful when buying your travel kit, such as backpack, first aid kit, walking shoes, etc. as these costs can easily mount up to hundreds of pounds, so it pays to shop around for the best deals in order to avoid draining that hard-earned budget.

As some items can be found cheaper abroad, it may be wise to buy camping gear and other travelling paraphernalia when you arrive at your destination - check prices online before departing.

If you have booked a trip with a gap year agency such as RealGap or I-to-I, your budgeting task will be easier as you will have paid for most of your daily costs already.

Consider if you are travelling with a group of friends that you may have to budget more money for socialising, e.g. drinking, cinema, restaurants, although make sure to stick to this budget during your trip and don’t go overboard, or you may find yourself penniless!

Be aware that deciding to find a job whilst travelling if your funds start dwindling is not a good backup plan to have before you leave.

Finding work legally abroad at short notice can be hard, especially taking into account the large amount of paperwork sometimes involved to get a work permit.

Therefore, it is recommended you have an emergency stash of at least £500 separate from your main funds, in case you get stuck.

Managing your money overseas

Ideally, you should consider carrying and accessing your funds overseas in several different ways for security purposes, and to make sure you'll always have some money in a safe place in case something happens, such as losing your debit card or your cash gets stolen.

To help you choose the best ways of managing your money during your trip, we've put together a guide on the options available, along with their pros and cons.

1. Credit cards

These may seem a useful way of withdrawing money from cash machines to pay for your needs whilst travelling, but in reality, you can find yourself shouldered with an expensive load of hidden charges. These include:

  • A cash withdrawal fee
  • Interest charges, even if you pay the balance off in full
  • A percentage “load” on the exchange rate, so £50 or foreign currency actually costs you more like £53 (and this doesn’t even show up on your statement as a “mark up”)

These are our recommendations for the best credit cards to take overseas, as they do not carry most of the hidden charges listed above.

1. Santander Zero – formerly Abbey National, this card does not carry a foreign exchange loading fee anywhere in the world, allowing you to always get the best possible exchange rate, and also doesn’t charge you for withdrawing cash.

However, the downside is that you’ll be charged a 27.9% cash withdrawal interest rate, which you will have to pay, even if you pay the balance on the card off in full.

2. Nationwide Select credit card – if you are looking for a credit card that offers a wide range of features, the Nationwide Select Credit Card is likely to be appealing. It has a 12-month introductory 0% interest rate on purchases and balance transfers, as well as no balance transfer fee. Although there are longer 0% interest rate periods available elsewhere, the card’s lack of foreign exchange fees could help it stand out from its rivals. Note though that it is only available to existing customers of Nationwide who have their main current account with the provider.

3. Halifax Clarity Card - this card makes an appealing travel card offering. It features no foreign transaction fees and no annual fee, which makes it a simple offering that’s easy on the wallet. Other credit cards, though, may be more suitable for day-to-day use since this card has no cashback, rewards or sign-up bonus.

4. The Natwest Credit Card - this is a great credit card that you can take anywhere in the world, with a low standard APR and no foreign transaction fees. However, if you’re looking for rewards, cashback or a sign-up bonus, you’ll have to look elsewhere.

5. The Royal Bank Credit Card - although this one lacks rewards, 0% offers, etc. it has a low standard APR and no foreign transaction fees, making it a good choice for gap year travellers.

2. Debit cards

Which? provides a very good comparison table of providers, so you can see which ones are charging any of those hidden costs mentioned earlier.

As you can see, some of the best debit cards to take overseas include those from Starling Bank, Cumberland Building Society, and Monzo.

This is even better than the credit cards listed above, as there is no load fee in Europe, no charge for using cash machines, and no interest charged on cash withdrawals (unless you’re overdrawn).

However, keep in mind that a debit card does not provide consumer protection.

Only with a credit card will any purchases over the value of £100 be protected for free (section 75 law), so if there are any problems such as the card company going bust, or you didn’t receive your item, you can always get your money back.

3. Prepaid cards

These are a recent phenomenon that have started taking off in the UK, and are already popular in the USA.

Like credit and debit cards, they allow you to make purchases of products and services, but the main difference is that you can only spend the balance that has been preloaded onto the card.

This means you don’t have to worry about getting into debt, as no credit or overdraft facility is available.

When you buy a prepaid card, you will be given a PIN number, and as soon as you’ve loaded it with money, you can use it in the same way you would a credit or debit card.

You can make purchases in shops and restaurants, on the internet and over the phone, as well as make cash withdrawals from ATMs.

You can load money onto your prepaid card by cash at a bank, Post Office, Payzone or Paypoint terminals, or by bank transfer.

However, not all of these loading options are available on all prepaid card providers, so it’s best to shop around to see which ones are the most flexible.

There are many advantages to be gained from getting a prepaid card, the main one being it can be loaded up by parents in the UK, so it’s an ideal option for the gap year traveler.

As you can’t spend anymore than what you’ve loaded onto the card, they also mean you have complete control over your finances, allowing you to stick to your gap year budget more easily.

Prepaid cards also carry their disadvantages in the form of various costs and fees involved in applying for and using them:

  • Card application fee – some prepaid card providers charge people to sign up for their card. This cost can vary from between £5 and £20.
  • Monthly subscription charge – check to see what services you get for this fee, such as free top-ups and an online service.
  • Loading fee – some providers charge you every time you load money onto the card with cash or a credit card.
  • ATM withdrawal fee – some providers charge you a fee for withdrawing money from an ATM. Even if they don’t, check there isn’t a fee if you withdraw money overseas.
  • Transaction fees – you may be charged every time you make a purchase using your card, either in person or online. This can apply both in the UK and overseas, so check carefully before signing up.
  • Account termination fee – there may be a charge for closing your account.
  • Card replacement fee – if your card is lost or stolen, some providers may charge you to replace it.
  • Card renewal fee – check when your card expires, as there may be a fee to get your card renewed.
  • Deposit fee – even though your provider may not charge you for topping up your card, there may be a fee if you put money onto it in a bank.
  • Customer helpline – find out whether you’ll be charged at premium, standard or national rates if you have to call the provider’s helpline.
  • Inactivity fee – some companies charge a small fee if you do not use the card for a certain period of time.

To work out which is the best card for you, opt for one that has little or no sign up, annual, monthly and top-up charges.

For travelling overseas, ideally you need a provider that offers several different top-up options (e.g. bank, online); has a 24 hour service, since you don’t know when you’ll need to top it up due to the different time zones; and can manage your account online so you can track your spending.

Moneysupermarket.com has a prepaid card comparison table so you can see which prepaid cards offer the cheapest deals.

4. Travelers cheques

These are pre-printed, fixed amount cheques allowing you (by signing them) to make an unconditional payment someone by paying the issuer of the cheques for the privilege.

Once signed (which you must do straight away when you receive your cheques) only the signatory, who can produce ID, can use the cheques.

They’re a great alternative to carrying cash around with you - they are accepted in banks and retailers worldwide, and do not expire, so if you don’t use them all, you can save them for another trip.

One of the main benefits is that if your cheques are stolen or lost, you can get them replaced almost immediately as long as you have the cheque numbers with you.

It’s therefore important to make a note of these, either on a piece of paper, or email them to yourself.

Although they offer peace of mind in knowing that your money is secure, they have their disadvantages in the form of charges. People who wish to buy travelers cheques are often faced with a commission charge of up to 2 or 3 %.

You may also have to pay handling fees and another charge for cashing them in. 

So it’s important to do your research and find who offers a good deal - Whichwaytopay.com has a good webpage comparing some of the best providers of travelers cheques.

Travelers cheques can only be bought in Euros, US dollars or UK Stirling, so the range of currencies available is very limited. Some people argue that travelers cheques are becoming outdated though, and are difficult to cash in at remote destinations.

However, if you are taking large sums of money with you, it helps to take a mixture of cash and cheques, so you have security of at least some of your funds.

5. Money transfers

If you have an international bank account, there is always the option of getting money transferred whilst overseas.

You will have to contact a family member or a friend back home to arrange the transfer, either through filing in a form or phoning the money transfer company.

This is a handy way of getting a large sum of money relatively quickly if you start running out of money during your trip.

Jobaroo.co.uk has a great page explaining all the pros and cons of international money transfers.

6. Cash

Make sure to always carry some local currency with you for transport, food or drink, in case you can’t get to an ATM for a while. Keep this safe in a money belt around your waist - don't keep it in your back pocket or a pocket in your rucksack where it can easily be stolen.

Travel discount cards

As well as finding out the best ways to carry around your money abroad, it’s also worth signing up for any discount cards that can help you save money on accommodation, food, drink and transport.

These are available to students, teachers and under 26s, with applications starting from just £9.

Some of the most popular ones include the:

Further information

For more gap year travel advice, please see: