More than 75,000 A-level students will head off on a gap year adventure in the coming months. But about 20% will not take out travel insurance and two in three will come home early because they run out of money. So before you start packing your rucksack, it is important to do some careful planning.

Funding

Many parents help out with the cost of their son or daughter’s gap year. Some give money before their child leaves, others support them along the way.

One option is for parents to apply for an additional credit card on their account that their son or daughter can use in an emergency or for agreed spending. However, the account holder is responsible for repaying the balance on the card, so they need to make sure that their child doesn’t get carried away and rack up huge bills.

An alternative is a prepay card. An increasing number of firms are offering these. They look like a credit or debit card and can be used in the same way. However, money has to be loaded on to the card before it can be used and it has no credit facility so you cannot go overdrawn. Most allow you to load cards by transferring funds online or over the phone, so parents can top up their son or daughter’s card when they need more money.

The main drawback of prepay cards is the cost. You often have to pay to purchase a card as well as incur charges when it is used for spending or cash withdrawals. Some also charge monthly fees. The Cashplus Gold card, for example, costs £9.95, but cardholders are also charged a £4.95 monthly fee as well as £3 each time they take money out of a cash dispenser abroad.

Others are cheaper. Travelex’s Cash Passport is free and there is no monthly fee, though there is a cash-withdrawal charge of £2.50 per transaction. However, you can only top up the card at the place you bought it from – not much use if you are travelling.

Lastminute.com and 360money Splash Plastic are more flexible. They cost £6.99 and £5 respectively to buy, but neither charges a monthly fee and they can be reloaded over the internet. Both levy a £1.50 cash-withdrawal fee.

Travel money

Most people who head off on a gap year don’t plan to live in the lap of luxury. But, even if you are intending to stay in hostels, the costs still mount up. The average person spends about £3,000.

It is worth taking some cash, but if you are planning to visit a number of different countries, you don’t want to carry large sums of money in various currencies. It is advisable to take a small amount in the currency of the first place you are visiting. US dollars are also useful as they are accepted in many countries and are easily exchangeable.

With debit and credit cards so widely accepted, there is no need to take large amounts of cash, or even traveller’s cheques. You will probably be charged commission when you buy traveller’s cheques and then charged again when you exchange them.

Sign up for your bank’s online banking facility before you set off so you can keep track of your spending and transfer money from a savings account if necessary.

Bear in mind, however, that while there may be cash machines on every street corner in developed countries and major towns and cities, if you are travelling to remote spots in Brazil or India, for example, cash is unlikely to be easily accessible. Take out some money before you set off on that leg of the journey.

Working

If you plan on staying in one place and working for a few months so you can save money to fund the next stage of your trip, it is probably worth opening a local bank account so that your wages can be paid into it.

Employment visas can be an issue in some countries, but you can apply for them before travelling or try to get a job with a firm that will sort one out for you.

Websites such as gapyear.com and findagap.com provide tips as well as information on job opportunities. It is also often possible to find cash-in-hand work in bars or on farms, although this is not usually legal.

Insurance

Travel insurance should be regarded as an absolute necessity. If anything goes wrong while you are abroad, even if you just need to see a doctor for a seemingly minor ailment, it can prove costly.

Direct Line, the insurer, said migraines and gastroenteritis, which causes vomiting and diarrhoea, are among its most common claims from gapyear travellers. The costs for tests and treatment if you fall ill with either of these in the US could be as much as £10,000.

You will need specialist insurance. A standard annual policy is not suitable because most insurers cap the number of days that you can be away for at any one time. The maximum is usually 35 or 45 days.

A number of insurers offer specific gapyear insurance. These include Direct Line, Endsleigh, Dogtag, Downunder Insurance, Flexicover Direct, Columbus, STA Travel, Swiftcover and Columbus Direct.

The cost of cover can vary significantly. The most expensive will not necessarily give you the most comprehensive level of cover.

For example, an 18-year-old man looking for a six-month policy would pay £203 for Downunder’s comprehensive policy, compared with £117 with Flexicover Direct’s Gap Year Gold, which is only available via Moneysupermarket, a comparison site.

Both offer the same level of medical-expenses and personal-liability cover. The cheaper Flexicover policy also gives more cancellation cover – £5,000 against £3,000 from Downunder – and more baggage cover – £2,000 as opposed to £1,500. Be careful with cheaper quotes, though, as you may find that you are not adequately protected.

Peter Gerrard at Insuresupermarket, a comparison site, said: “Gap-year policies vary widely with exclusions and caveats commonplace, so getting the best deal really does come down to individual circumstances. You need to think about specific activities you do and don’t want insurance for as well as the level of cover you need.”

Common exclusions include bungee jumping, white-water rafting, scuba diving, hang-gliding and horseriding. You generally have to pay more if you want cover for winter sports such as skiing or snow boarding.

Carmel McCarthy at insurer Direct Line said: “If you want to take part in a dangerous activity or extreme sport, ring your insurer beforehand to check that you are covered.”

Also ensure you have the right level of personal-possessions cover because replacing iPods, cameras and wallets can be costly. Read the small print: some possessions may have to be kept on you or locked away.

While gapyear policies will cover you if you are travelling, certain things may not be covered if you work while you are away. If the work is unpaid, the insurance will probably be effective. However, if you have an accident while in paid employment your insurer may not foot the bill for any medical treatment you receive. Check what insurance your employer has, particularly if you will be operating machinery or driving a vehicle. Laura Hawker, 24, from Surrey is about to go travelling to South America and New Zealand for six months before starting as a trainee solicitor next March. She has taken out Direct Line’s Discoverer insurance, which is designed for gap year travellers and covers extreme sports such as bungee jumping, scuba diving and horse trekking

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