Opting to take a gap year after finishing university can be appealing, particularly in the current economic environment in which the job market is so tough. Gap years are not cheap, however, so it is important to start financially planning yours sooner rather than later.
Choosing the right type of savings account is vital, whether you are planning to jet off to warmer climes or Inter-Rail across Europe. Comparing different places to keep your savings at MoneySupermarket.com can help you to identify the most appropriate product.
Even though interest rates are low at the moment, the chances are that you will still be better off if you put your money in a savings account rather than leaving it languishing in a current account.
You may find that investing in an ISA throughout your university years is a good way of putting something away on a regular basis. You can choose between a low-risk cash ISA or a higher-risk stocks and shares ISA.
The key benefit of ISAs is that the interest earned is tax free. Whilst you may not be a tax payer at present, once you start earning any money that you have in an ISA will be protected.
If you are happy to tie your money up then you could opt for a fixed-rate bond. This can also be beneficial if you will find it difficult to resist the temptation of having money available in an easy-access account.
There are a number of different tactics that you can use to help save for your gap year. You may be able to find work during the holidays or on a part-time basis during term time.
You could find that you can cut back on your spending too. It can be all too easy to get into a routine of casually spending money by buying a coffee before lectures or eating out regularly, for example
Sitting down and working out where your money goes can throw up some surprising results. It is likely that you’ll find some areas that are easy to cut back on.
Shopping in charity shops or from internet sites such as eBay can be a good way of picking up some vital equipment for your travels at a fraction of the cost.
How to Access Your Funds
You will also need to consider how best to access your funds while on your travels. If you are planning on using a credit card then make sure that you have one that is designed for overseas travel.
Some credit cards apply an extra fee when used abroad, have a loading to the exchange rate used and charge a hefty percentage for cash withdrawals. So it pays to shop around.
If you will not be able to pay off your balance in full each month then using your debit card may be a better option as you will not incur interest charges.
An alternative is a pre-paid card. These cards can be loaded with money and then used to pay for things in exactly the same way that you would with a credit or debit card. An added bonus is that your parents can also load money on to them if you find yourself stuck without funds.
Whichever option you go for, research all of the charges that will apply so there are no nasty surprises later. With a little forward planning now you will find that you have more time to enjoy your gap year without worrying so much about your finances.