Will your cash fill the gap when you see the world?

The exam season is looming and the thousands of students who are up to their eyes in revision for A-levels or finals will be dreaming of exotic travels afterwards.

New figures from the University and College Admission Service (UCAS) show that 22,656 students have decided to delay taking up their university places until 2008. Many of these will use this time to travel overseas.

Of those finishing university this year, around 77,000 plan to go abroad rather than take up full-time employment, according to new research from Direct Line Travel Insurance.

But taking a gap year is no longer the preserve of students and graduates; more and more people of all ages are now taking a break from their careers to see the world. A study from insurer RIAS claims that as many as 775,000 Brits aged 55 or over have taken a holiday abroad of six months or longer, with two-thirds choosing a long-haul destination such as Australia or New Zealand.

Whatever your age, leaving the country for an extended break involves careful financial planning, starting with how to save to pay for the trip.

Philip Pearson, of independent financial adviser (IFA) P&P Invest, recommends drawing up a budget listing all big expenses, including transport, food and accommodation. "Research into the local cost of living is helpful as this will indicate how much is required each day to meet your basic needs."

Martin Bamford, of IFA Informed Choice, suggests "gappers" make the most of tax-free accounts to boost their savings. "Use your mini cash individual savings account allowance of £3,000 this tax year," he says.

You also need to consider how you will gain access to your savings while overseas. Most debit and credit card providers impose a "loading fee" of around 2.75 per cent on all purchases made abroad. Usually, there is also 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.

Sue Hannums from IFA AWD Chase de Vere recommends a card from Nationwide building society. "This is one of the best - just because it doesn't have a foreign usage charge," she says. "But it only offers three months' 0 per cent interest for purchases, after which it shoots up to an annual percentage rate [APR] of 17.9 per cent. However, if you want to take a card for emergencies only, this is a perfect option."

Older "gappers" must ensure there will be enough money to meet any commitments, such as pension and mortgage payments. "You need to plan what you might do with your home," says Philippa Gee from IFA Torquil Clark. "If you let it out, you need to tell your mortgage provider, as this could affect your deal."

She adds: "Contact your insurance firms before leaving to make sure you are not invalidating your policy if you travel to a particular area or stay away for a certain length of time."

Direct Line has found that a third of students planning to take a gap year have not thought about insurance - but comprehensive travel cover is vital for all age groups.

According to the price- comparison service Money- supermarket.com, an extended backpacker policy for six months' worldwide travel would cost £134 for an 18-year-old with Down- under Insurance. This includes £2m cover for medical expenses, £2m personal liability cover, and up to £1,000 for lost luggage.

If you want to take part in extreme sports such as skydiving or white-water rafting, you must let your insurer know. You may find these activities are not covered, or that you have to pay an additional premium.

You should also check the cover limits of your policy, says Peter Gerrard at Moneysupermarket.

"Make sure your medical expenses cover is a minimum of £2m," he explains. "If you are travelling to remote places, this should cater for any special arrangements that might need to be made, such as helicopter evacuation in case of an accident."

Working her ticket in Oz

Leah McLoughlin from Glasgow took a gap year in 2005 and spent 10 months travelling and working in Australia and Thailand.

The 24-year-old sold her car to help raise the £3,000 needed to finance the trip.

"I was lucky to work for an employer that allows career breaks of up to a year once you have been working for at least two years - so I knew I would have a job to come back to," she says. "I got a working visa and got temporary jobs in Sydney and Melbourne."

But her trip did not go entirely smoothly as she had her rucksack stolen. The contents included a camcorder, a camera and some cash.

Leah called the police, filled out a crime report and then contacted her insurer, Direct Line. "The claim was settled in about two or three weeks and a cheque was sent to my home," she says. "My parents paid this into my bank account so I could access it while travelling."

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