Building number confidence: Budgeting
7. Currency exchange for travel
Currency is the standard unit of value in the money system used within an economic area. For example, the Pound (or Pound Sterling) is the currency used in the UK, and in many European countries it is the Euro. The exchange rate is the value at which one currency can traded for another.
When travelling abroad, you will need to use the local currency in whatever countries you visit, and can exchange UK money for this before you go, at the airport, or when you arrive. Shop around for the best deals though - airport currency exchange kiosks, although convenient, often offer less favourable exchange rates or fees.
To change British money to foreign money - multiply by the exchange rate.
Foreign currency = British currency x Exchange rate
An exchange rate board shows how much of one currency you get when you exchange it for another.
You’ll usually see two columns: Buy and Sell.
Buy – This is the rate the currency provider offers when they buy foreign currency from you. For example, if you have US dollars and want to exchange them for pounds, this is the rate you’ll get.
Sell – This is the rate they use when they sell foreign currency to you. For example, if you want to buy euros for your holiday, this is the rate you’ll pay.
To calculate how much you will receive in exchange for your UK pounds (GBP), multiply what you wish to exchange by the 'buy' rate offered by the exchange service.
For example, if the current exchange rate for US Dollars is 1.3518, this means that for every pound (£) you exchange, you will receive 1.3518 dollars ($).
So for £500 you would receive $675.90 (500 x 1.3518).
Note that you may also need to pay currency conversion fees, which are charges for exchanging one currency into another.
Budgeting check
Before you head off on holiday, you wish to buy some Euros.
An exchange rate of £1 = €1.1465 is being offered by Simple Travel Money.
How much will you receive if you exchange £300 for Euros.
£343.95
300 x 1.1465 = 343.95
Converting prices when shopping abroad
You may also want to convert the price of items you are considering buying back into pounds, to help you decide if they are value for money.
To do this, divide the price of the item (in its foreign currency) by the exchange rate.
For example, if you want to buy a pair of shoes costing €150 and the exchange rate is £1 = €1.25.
€150 ÷ 1.25 = £120
So the cost of the shoes in pounds is £120.