Advice for Looking After Your Funds While Travelling and Backpacking

Managing your money on the road can be tough if you are new to this whole travelling lark. Read this guide to avoid some of the classic pitfalls and to illuminate your mind to potential dilemmas, yo.

Haggling

Whether you see it as a fun part of travelling or a pain in the arse, haggling is a key part of shopping in many countries. If the price of an item is displayed clearly, haggling won't be necessary, and might cause offence. If it isn't, then whatever you're buying, assume that the price is negotiable.

Haggling works like this: the seller suggests a price considerably higher than he expects to get. You act shocked and come back with a price considerably lower than the maximum you'd be prepared to pay. The seller acts hurt and you argue it out until you reach a price you're both happy with. As a buyer, it's impossible to find out how much items 'should' cost. In countries without Watchdog and Which? magazine, there's simply no 'should' about it. Shop around, talk to fellow travellers, and you won't get ripped off too badly.

There's only one hard-and-fast rule when it comes to haggling, and that's to do it with good grace. Yes, the stall-holder may be charging you five times more than he'd charge a local, but that's because, to him, you seem very rich. Your plane ticket to get to his country cost more than he'll earn in his lifetime; don't think he doesn't know this. Be assertive by all means, but be polite too, and above all, smile.

Cash and currency exchange

Hard Cash

Wherever you're going in the world, you'll need some local currency for the first few days and for ongoing minor expenses. Order early from your bank, building society or travel agent at home if the currency you need is obscure. In addition, for many developing countries in particular, US dollars are useful to have as they are accepted in almost any country. Non-convertible currency will need to be picked up in-country.

Shop Around

Currency charges vary from one outlet to the next. Don't just look at commission; the actual exchange rate varies too. Travel agents tend to be cheaper than banks and many have commission-free buy-back policies.

Don't Be Fooled

When you're getting money exhanges, wherever you are, it's sensible to work out first how much local currency you expect to get for the amount you're exchanging. That way if the teller works it out wrong you'll know straight away. In reality, however, tellers are rarely wrong.

Black Markets

Some countries have flourishing black markets in currency exchange. You'll know if you're in such a place because touts will constantly pester you. The fact is, however, that rates are rarely better through the black market than through normal channels and, of course, black markets are illegal.

Travellers' cheques

Safe and Sensible

Whatever the high-tech alternatives, travellers' cheques are still a safe and convenient way to carry money abroad. They're accepted in almost every country.

How they work

Travellers' cheques can be cashed in any country and carried safely because, if you lose them, you can cancel the old ones and order replacements. Unless you're going to be spending your whole trip in one developed country, for example Australia, order the cheques in US dollars. Dollars are the most widely accepted currency in the world. Also, ask for the cheques to be in small denominations so you can cash only what you need. Remember, you'll incur a commission charge every time you cash a cheque.

Note the numbers

Remember to make a note of the serial numbers - and keep that note separate from the cheques. Also leave a list of the cheque numbers at home. That way, if they are lost or stolen, you will be able to get your money back from the cheque provider by quoting the numbers of the cheques you've lost.

Cashing travellers' cheques

You can cash travellers' cheques at banks or other exchange facilities in towns all over the world. If you're travelling to more rural, out-of-the-way places, make sure you cash enough of your travellers' cheques to last you before you leave town.

Credit cards

Emergency funds

It's a good idea to take a credit card overseas for emergency situations - if you need to leave somewhere in a hurry or require urgent medical treatment they're invaluable. You'll need to be careful since it's easy to run up a big bill which you can't pay off. This will incur interest charges after the end of the month in which you used the card (or immediately, if you draw out cash from an ATM). So persuade your bank manager to let you have one, but make every effort not to use it.

Paying off the minimum amount

If you're travelling long-term you'll need to organise a direct debit from another account to pay off the minimum repayment amount demanded each month.

Prepaid cards

Safe and sensible

Prepaid cards are a relatively new thing. You load them up with cash and then just use them as you would a credit or debit card. They're ideal for travelling because they are not linked to your account, are fraud protected and don't involve credit, so no worries if it gets nicked. Also great if you don't have a bank account and need to earn some money, because wages can be paid directly onto them.

Money wires

Useful but expensive

Money wire companies Western Union and Moneygram allow cash to be sent electronically in a matter of minutes from and to almost any city in the world. The sender arranges the transaction and explains which bank the money will be sent to; the sender will then need to give the sendee a reference number which will be needed - as well as a passport - to pick up the dosh. This can be useful in an emergency but it's a relatively expensive process. Also, it's rarely as simple as they make out and not worth using on a regular basis.

Looking after your money

Out and about

The first thing to say is that you should never have large amounts of cash when you're travelling. Take your money in travellers' cheques and don't cash more than you'll need. Your travellers' cheques, credit or debit card, passport, documents, and any cash that you won't need during the day should be kept in one of two places: the secure safe in your hostel, or a money-belt.

Now, when we say 'money-belt', don't think 'bum-bag' and go puke in a corner. They are two completely different things. Money-belts are flat, breathable, normally flesh-coloured belts that you wear under your clothes, and are an absolutely essential piece of travel kit as they're very discrete and hard to nick.

As well as a money belt, take a slim wallet to carry the cash you'll need for the day.

Muggers and pickpockets aren't a common problem, but can strike anywhere in the world. Take precautions: keep your wallet somewhere discrete (not your back pocket), avoid poorly-lit or 'dodgy' areas, shell out for a taxi rather than walking home alone or after dark, and above all, don't flash your money or valuables around, wherever you are.

If you are mugged, needless to say, hand over your wallet. It shouldn't have much cash in it, but even if you're a fool and it's stuffed with tenners, your life is worth more than any money. No contest.

At night

If you're worried about someone swiping your money while you sleep - or even if you're not - why not keep it in the end of your sleeping bag by your feet? It'll have an interesting aroma in the morning, but you'll sleep easy.

Avoiding scams

Nothing we can tell you will guarantee that you don't get scammed. There are as many scams as there are scamsters, and some are mighty cunning. We could tell you not to trust anyone you meet, but that wouldn't make for a particularly fun gap year. Our best advice is this: don't be scared, but be aware. It rhymes, so it's probably sound.

Any transaction involving medium-to-large amounts of money should put you on high alert. Any transaction involving you giving money to someone, and that person going out of the room or down the road with your money to collect your purchase, should set off alarm bells and possibly a big flashy red light.

Be scam-conscious with fellow travellers, as well as with locals. If a fellow traveller needs money fast to get her out of trouble, why has she come to you rather than asking a friend or family-member to wire her some? Has she contacted the local police, or British Embassy? If not, why not?

Be aware, be assertive and you should be fine.

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Budgeting on the road

The slogging and saving stage of your gap year may be over, but this doesn't mean you can relax completely as far as your funds are concerned. It's important to be aware of what you're spending... and what you've got left. You don't want to come home after two weeks 'cause you've blown all your money on five-star hotels.

Some people go as far as keeping a record of everything they spend. If you think there's any chance that you'll keep this up, buy a wee notepad and keep it in your day-pack. Make a note whenever you withdraw money from an ATM or change a travellers' cheque, and whenever you spend any money. This might seem over the top, but you'll know exactly where you are.

The notebook method can be handy if you're travelling with a friend or partner and sharing some expenses. Keeping track in this way means one person won't end up spending loads more than the other.

Other people only allow themselves to spend a certain set amount each week. This is a great way of keeping on top of your money, but make sure you keep some extra money aside for treats. You don't want to miss out on a once-in-a-lifetime opportunity to bungy-jump with dolphins 'cause you've spent all your budget for that week.

The very least you should do is stay aware of how much money you've got left in travellers' cheques, and how much you have in your bank account. The latter will be much easier if you can check your balance online. Most banks now offer this facility - make sure you set it up before you go.

Whatever you do, keep a good chunk of money aside for unexpected problems. If you're lucky and don't spend it, you'll have the luxury of arriving home to a bank account that's not completely empty. Alternatively you could blow it all on your last night...

Organising your travel money

Bank accounts

If you're still using the same bank account you had as a kid, now's the time to think about changing it. It's likely that more money will be going into - and coming out of - your bank account during your gap year than ever before, and you want to make that money work for you.

It's a good idea to have two accounts. You'll need a current account for day-to-day transactions like withdrawing money from cash-points. But if you open a savings account too, you'll be able to watch your travel stash grow... Savings accounts offer higher rates of interest than current accounts, which means any money sitting in there will be earning you more money. Result.

The accounts which offer the highest rates of interest often require you to give notice (typically a couple of months) when you want to withdraw money. This might be a bit annoying, but is good in the long term as it means you can't fritter away your travel funds on pies and ale before you leave the country.

Why not set up a standing order to take a set amount of money from your current account each month and put it in your savings account? That way you'll know exactly how well your saving is going.

Fantastic plastic

If you don't have one already, think about getting a debit, credit or prepaid card.

Debit cards let you withdraw money from cash-points and pay for things in shops or over the phone or internet. They also let you get 'cashback' in shops, pubs etc. Any money you spend on your debit card will be taken from your account straight away, which means you won't get a monthly bill and can't run up big debts. Debit cards are an invaluable gap year accessory: most let you pay for stuff and withdraw cash overseas (sometimes for a small fee).

Credit cards should be approached with a bit more caution. Pay for stuff on your credit card and the money won't be taken out of your account immediately. Instead you'll receive a statement each month telling you how much you owe. You won't need to pay this off all at once, but the longer you leave it, the more interest you'll have to pay on it. Interest charged on credit cards is generally high.

You can see how this system is both very handy for travellers (you can pay for things when you need them, even if you don't have enough money in your account), and quite risky (you can get yourself into some major debt if you're not careful). Think carefully before you get one, and before you use it.

Prepaid cards are a relatively new way of taking your money travelling. Essentially, they are like a mobile bank account and combine the best features of debit and credit cards. They are fraud protected, like credit cards. You can't spend what you don't have, like debit cards. You also don't need a credit check, so they're very handy if you're working while you're travelling.

A question of trust

Before you go travelling, think about adding your parents or a trusted friend as signatories to your bank account. This means they'll be able to do things with your account and the money in it while you're abroad. This might sound like a loony thing to do, but could be very handy. If there are any problems with your account they can be dealt with straight away, rather than being left to fester until you get home. Banks cannot do anything on any account unless they are dealing with an organised signatory. It does mean that your parents or friend can access your balance, so if that's a problem for you, think twice... but it also means you can leave money in the account to pay for credit card bills etc which is important.