Will your gap-year budget get you there and back?

Adventure beckons, but plan ahead or you'll feel the weight of the world on your shoulders

With A-levels and finals firmly behind them, school-leavers and graduates across the country will be preparing to pack their bags and head off to far-flung corners of the globe.

A gap year offers the perfect opportunity for sun, sea, sand and a taste of adventure before going on to university, or settling down to the world of work. The experience can have a serious purpose, too: many "gappers" opt to learn new skills by taking part in voluntary community or environmental projects in developing countries.

But a trip such as this does not come cheap. A round-the-world air fare typically costs about £1,000, while a place on an expedition with the youth development charity Raleigh International will set you back £3,000.

Financing your trip is just as important as deciding where to go or what to do - and the key to this is forward planning, says Philippa Gee of independent financial adviser Torquil Clark.

"Many people who have managed their finances reasonably well until their gap year then throw caution to the wind and suddenly pile up huge debts they can no longer handle on their return," she says. "The trick is to get a balance between being able to have a great once-in-a-lifetime experience, while also keeping within your budget."

She recommends gappers identify each location they plan to visit and fix a budget for that period. While it is common for people on gap years to work their way around the globe, many will also spend part of the time working here in the UK. This allows them to put together a cash reserve, which should be held in a low-risk, accessible savings fund paying a high rate of interest.

Stuart Glendinning of price- comparison service Moneysupermarket.com warns that if you have just left school or university, you may not have built up much of a credit record, and may not be able to get the best deals from financial service providers. But that should not deter you from shopping around.

For your savings, he picks out the ICICI Bank, paying 5.15 per cent on its HiSave account, and the Anglo Irish Bank, paying 4.85 per cent on a minimum balance of £500. He also suggests that those who have a graduate bank account could look at negotiating a larger overdraft.

Gappers are likely to use their debit card for everyday transactions while overseas, but it is important to be aware of the hidden costs. Most debit - and credit - card providers levy a "loading fee" of around 2.75 per cent on all purchases made abroad; many also charge a handling fee of up to 2 per cent of the transaction value if you use your card to withdraw cash at a foreign ATM. (Nationwide building society is one of the few providers that does not do this.)

You may also want to consider taking one of the pre-pay currency cards now available; these can be "reloaded" with money, either online, over the phone or at an appointed agent. Providers offering this type of service include American Express with its Traveller's Cheque Card, Western Union and its Travel Cash Card and Travelex with its Cash Passport. Cards like these have been described as a hybrid of a debit card and traveller's cheque, offering the convenience of the former and the security of the latter. But they can carry quite punitive charges.

Some providers will make you pay for taking the card out to begin with - Amex, for example, charges £20 - while others, such as Western Union, impose a fee on each top-up. Most also charge if you need to cancel your card.

One financial product you cannot afford to scrimp on, at any cost, is travel insurance.

New findings from the insurer Direct Line show that one in five gappers haven't thought about cover when planning their trip, but if you head off without it and things go wrong, you could find yourself faced with medical bills and repatriation expenses running into thousands of pounds.

If you already have an annual travel insurance policy, do not assume this will protect you on your gap-year travels. Most policies of this type cover shorter trips only. Instead, you need to approach an insurer offering special gap-year "extended policies" that run for between three and 18 months - though make sure you shop around.

Information from Moneysupermarket.com shows that a 19-year-old female could pay as little as £220 for worldwide cover for a year-long trip from COE Connections.

When taking out a policy, check that it covers all the countries you want to visit. Remember that no insurer will pay out on claims relating to countries that the Foreign Office has advised British travellers not to visit. (See www.fco.gov.uk/travel for an up-to-date list. This web page also has a link to the Foreign Office site GoGapYear.com.)

As with any travel policy, make sure you declare any existing medical conditions at the outset, check the cancellation terms and always read the small print.

"Check your medical expenses cover is a minimum of £2m," says Richard Mason from Moneysupermarket.com. "And if you're travelling to remote places, check this covers you for any special arrangements that may be needed - such as helicopter evacuation in case of accident."

Further to this, make sure the policy covers all the activities you want to take part in. If you are planning to try extreme sports, such as parachuting or white-water rafting, you will generally have to pay an extra premium for this.

Grown-up gappers

Gap years were once the preserve of the young, but they are now becoming popular with those in later life, who are opting to take extended time off work. While a well-chosen sabbatical can enhance your employment prospects on your return, there are additional financial implications you need to consider as a "grown-up gapper", since you are likely to have more commitments than young travellers.

"You won't be making pension contributions while you are away - and that this will have a direct result on the amount of pension you will receive in retirement," warns Ms Gee at Torquil Clark.

"If you're renting out your property, make sure your mortgage and insurance companies are aware of the change. Think about getting an agent to act on your behalf - although you will need to factor this into your costs."

Many people are waiting until they have retired from work to go off on their travels. New research from American Express shows that 38 per cent of all gap years are taken by the over-55s.

Travellers in this category may find they have to pay higher premiums for their cover, especially if they are aged 65 or over. But once again, shopping around for a deal can help bring down costs.

'£3,700 put me on the road to Oz'

Suzanne Partis, 22, from Ashington, Northumberland, took a gap year before embarking on the final year of her higher national diploma in business and finance, and spent 12 months working and travelling in Australia.

"I wanted to take a break from studying," she says, "so I spent some time working here in the UK to save up enough money to fund the trip. The flight cost around £700 and I saved an extra £3,000 so I'd be able to find my feet when I arrived - and have a cash reserve in case of emergency."

During her trip, Suzanne took a variety of jobs - including bar work and marketing - and opened an Australian bank account to allow her wages to be paid in directly.

"There were times when things were a bit of a stretch financially, but I did try to budget as best I could," she says.

Suzanne was glad she took out insurance in the UK before travelling, as she ended up putting in a claim for more than £350 with her insurer, Direct Line, when her handbag was stolen from one of the youth hostels she was staying in.