8 Money Moves Students Should Make During a Gap Year


Parents and soon-to-be college students are giving the gap year a second look after the White House announced that Malia Obama will be taking one before attending Harvard in 2017. Also popularized by England's Prince Harry, who famously took time out for ranching in Australia and volunteer work in Africa in 2004, the gap year is a break between high school and the start of a person's higher education (or between college and graduate school).

Most often, the gap year is used by young people as an opportunity to see the world, explore new cultures, immerse themselves in a nonacademic pursuit, work a job or internship, or volunteer for a cause. The goal is to gain valuable life experience before delving deeper into academics, trade school, military service — wherever your next step in life takes you.

Of course, a year of self-exploration doesn't come free. Read on for our student guide to prepping finances for a gap year.

1. Start Saving a Year Out

How much a gap year will cost depends on how you plan to use it. So, map out your yearlong plan, estimating how much money you'll need. Of course, plans change. And that's okay. All you really need is a good estimate to get you motivated to start saving.

2. Open a Gap Year Bank Account

Now that you've got a savings goal, open up a separate bank account to house your gap year fund drive. To make your big funding goal seem more achievable, break it down into smaller, more manageable monthly and weekly goals. This will keep you from feeling overwhelmed. Next, devise a plan for reaching these mini-fundraising goals. Will you cut down on weekend spending? Will you get a part-time job or pick up extra hours at your existing gig? Whatever you decide, be sure to hold yourself accountable.

3. Apply for a Grant or Scholarship

There are plenty of grants and scholarships out there created specifically to ease the financial burden of enrichment programming and travel during the gap year. If you have interest in visiting the Middle East, for example, a grant from Unofficial Ambassadors' Mosaic Grants Program can make the experience more affordable. If you have demonstrated leadership in tackling issues aimed at protecting the environment, the Brower Youth Awards, which is an initiative by Earth Island Institute, divvies out $3,000 scholarships to young people each year.

Be sure to also check out any opportunities offered by your prospective university or college as well as local organizations in your area. In Humboldt County, California, for example, there's a generous annual scholarship that offers up to $6,000 to gap year students who are seeking participation in a program accredited by the American Gap Association. Schools including Tufts University and the University of North Carolina have financial aid programs for gap year students, as well.

4. Give Creative Fundraising a Shot

There are so many ways to rake in extra cash. Just ask the twin teens from England who used their gap year to cultivate a loyal following on a YouTube channel that has earned them tons of money in advertising, which funded their year of travel. Other ideas: Launch a crowdfunding campaign or host an event — battle of the bands, pool party, theatrical performance — to which you sell tickets that will cover your expenses.

5. Invest in Traveler's Insurance

If you plan to travel abroad during your gap year, organizations such as International SOS offer top-notch insurance policies that can save you hundreds or thousands of dollars should something go wrong. Let's hope you never need it. Truth be told, most of the time traveler's insurance does end up being a waste of money. But should you ever need to cover the cost of inconveniences such as a last-minute trip cancellation, emergency medical evacuation, or lost luggage, you'll be more than glad that you have it.

Of all the expenses to skimp on while traveling abroad, don't let insurance be one of them. After you choose a plan, be sure to do your research so that you know exactly what it covers — and what it doesn't.

6. Learn the Ins and Outs of Your Bank's ATM Fees

Commit to memory the occasions on which your bank will hit you with an ATM fee. Then be sure to avoid them. While a few dollars here and there might not seem like much, over time they can really add up. Just as there's no reason to throw money out the window, there's no reason to not educate yourself on your bank's ATM fee policies.

7. Devise a Strategy for Accessing Day-to-Day Funds Abroad

Despite fees, ATMs are still the best bet for accessing money abroad. If your travels are set to land you in a major international airport, you'll likely get the best rate by withdrawing cash in the local currency from an ATM upon arrival to your destination city. While it can be comforting to travel with some local currency already in your pocket, having that convenience will cost you. You'll have to fork over a commission fee to exchange money at a bank or ATM in the U.S.

However, if you'll be flying into a smaller airport, there may not be any ATMs — or at least not any properly functioning ones — when you get there. In this case, it's best to travel with about $100 in the local currency so that you can pay for immediate expenses, such as food and transportation, without hassle. Once you journey outside the airport, you can find an ATM and withdraw more local money at a better rate.

8. Reapply for FAFSA

Students who qualify for federal financial aid before deferring college for a year must reapply the next year by filling out the Free Application for Federal Student Aid. So long as the finances of the student's family don't change in a major way, the student will likely receive the same financial aid package. Also, students who have secured a scholarship from their university can sometimes negotiate to have the aid held for them until their delayed matriculation. So if you have a university or college-funded scholarship, be sure to inquire about how you can go about receiving the award after your gap year.

Did you — or will you — take a gap year? What'd you do? How did you prepare your finances before you left?

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