Mexico is not as cheap as it once was, despite the instability of its currency. Although, in general, costs are lower than you'll find at home, compared with the rest of Central or South America, prices here can come as something of a shock.

In the long term, the NAFTA free trade treaty with the US and Canada can probably be expected to keep costs (and, one hopes, wages) rising, though prices will fluctuate somewhat as the peso goes down against the dollar, and inflation moves in to fill the gap. As the peso is so unstable, all prices in the guide are quoted in US dollars; be aware, however, that these will be affected by unpredictable factors such as inflation and exchange rates. Latest developments and your own common sense will determine how you apply them.

The developed tourist resorts and big cities are invariably more expensive than more remote towns, and certain other areas also have noticeably higher prices - among them the industrialized north, especially along the border, Baja, and all the newly wealthy oil regions. Prices can also be affected by season and many hotels raise their prices during busy times of the year. Summer, Christmas and Easter are the peak times for Mexican tourists and areas like Acapulco and Cancún, which attract large numbers of overseas visitors, put their prices up during the high season from November to May. Special events are also likely to be marked by price hikes. Nonetheless, wherever you go you can probably get by on US$225/£150 a week (you could reduce that if you hardly travel around, stay only on campsites or in hostels, live on the most basic food and don't buy any souvenirs, but it hardly makes for an enjoyable trip), while on US$500/£330 you'd be living very well.

Accommodation prices range from only a couple of dollars for a beach cabaña to upwards of US$60/£40 for five-star luxury. A room in a cheap hotel costs US$9-15/£6-10 per person and a room in the mid-range US$20-50/£13-33. Food prices can also vary wildly, but you should always be able to get a substantial meal in a basic Mexican restaurant for around US$4/£3. Most restaurant bills come with fifteen percent IVA (Impuesto de Valor Añadido, or VAT sales tax) added; this may not always be included in prices quoted on the menu. If you intend to travel around a lot, transport could be another major expense because distances are so huge. On a per-kilometre basis, however, prices are very reasonable: Mexico City to Acapulco, for example, a journey of over 400km, costs less than US$22/£15 by first-class bus, while a 24-hour journey such as Mexico City to Cancún (1800km) works out at around US$80/£53.

As always, if you're travelling alone you'll end up spending more - sharing rooms and food saves a substantial amount. In the larger resorts, you can get apartments for up to six people for even greater savings. If you have an international Student or Youth Card , you might find the occasional reduction on a museum admission price, but don't go out of your way to obtain one, since most concessions are, at least in theory, only for Mexican students. Cards available include the ISIC card for full-time students and the Go-25 youth card for under-26s, both of which carry health and emergency insurance benefits for Americans, and are available from youth travel firms such as STA. Even a college photo ID card might work in some places.

Service is hardly ever added to bills, and the amount you tip is entirely up to you - in cheap places, it's just the loose change, while expensive venues tend to expect a full fifteen percent. It's not standard practice to tip taxi drivers

The "new Mexican Peso", or Nuevo Peso , usually written $ (sometimes N$), was introduced in 1993 and is made up of 100 centavos (¢, like a US cent) - it's the equivalent of 1000 old pesos. Bills come in denominations of $20, $50, $100, $200 and $500, with coins of 10¢, 20¢, 50¢, $1, $2, $5, $10 and $20. The use of the dollar symbol for the peso is occasionally confusing; the initials MN (moneda nacional) are occasionally used to indicate that it's Mexican, not American money that is being referred to.

The easiest kind of foreign currency to change in Mexico is US dollars cash. US dollar travellers' cheques come second; Canadian dollars and other major international currencies such as pounds sterling, yen and deutschmarks are a poor third, and you'll find it hard to change travellers' cheques in those currencies. Quetzales and Belize dollars are best got rid of before entering Mexico (otherwise, your best bet for changing them is with tourists heading the other way). Correspondingly, you'll get the best rates for cash dollars, slightly lower rates for dollar travellers' cheques, and rates lower still for other currencies: indeed, it is a good idea to change other currencies into US dollars at home before coming to Mexico, since the difference in the exchange rate more than outweighs the amount you lose in changing your money twice.

Although the banks have all been nationalized, each is run differently. The Banco Nacional de Mexico (known as Banamex) is probably the most efficient; Bancomer, almost as widespread, is also good, as is the smaller Banco del Atlantico. Banks are generally open Monday to Friday from 9.30am until 5pm, though often with shorter hours for exchange. The commission charged varies from bank to bank, while the exchange rate, in theory, is the same - fixed daily by the government. Generally, only larger branches of the big banks, plus some in tourist resorts, are prepared to change currencies other than dollars - and even then often at worse rates than you would get for the dollar equivalent. ATM cash dispenser machines are now ubiquitous in Mexico, and make a useful alternative.

Casas de cambio (exchange offices) are open longer hours and at weekends, and have varying exchange rates and commission charges; they also tend to have shorter queues and less bureaucratic procedures. They usually give better rates than banks, but it's always worth checking, especially if you're changing travellers' cheques. Occasionally, casas de cambio give rates for Canadian dollars, sterling and other currencies that are as good as those they give for US dollars, so again it's worth shopping around, especially if you intend to change a large sum.

If you're desperate, many hotels , shops and restaurants that are used to tourists are prepared to change dollars or accept them as payment, but rates will be very low. There isn't much of a black market in Mexico since exchange regulations are relatively loose, and it's not really worth bothering with unless it comes about through personal contacts or you want to do someone a favour.

In touristy places, such as Acapulco and Tijuana, US dollar bills are almost as easy to spend as pesos. Of course the big disadvantage with cash is that once stolen or lost, it's gone forever. For that reason, most travellers prefer to bring plastic and/or travellers' cheques (personal cheques are virtually worthless in Mexico). But do bring some dollars cash - sometimes you won't be able to change anything else. It's also a good idea to have a mixture of denominations, including a wad of single dollar bills, and to try to bring some pesos (US$50/£30-worth, say), just in case you're unable to change money on arrival, or would rather not wait in a long line to do so. Although few US banks keep foreign currency on hand, and banks in Britain, Australia and New Zealand are unlikely to stock Mexican pesos, you should be able to order them from your bank's foreign desk if you give them a few days' notice; or you may find them at specialist exchange desks at the airport.

Travellers' cheques have the obvious advantage over cash that if they are lost or stolen, the issuing company will refund them on production of the purchase receipt. For that reason, keep the receipt safe and separate from the cheques themselves, along with a record of the serial numbers and a note of those ones you have already cashed. If your cheques do get lost or stolen, the issuing company will expect you to report the loss to their local office immediately. You pay one to two percent commission to buy the cheques, and usually get a lower rate of exchange for them, but it's worth it for the extra peace of mind.

When buying travellers' cheques, get a sensible mix of denominations, and stick to the established names - Thomas Cook, American Express, Visa or one of the major American banks - not only because these will be more recognized, but also because there will be better customer service should they be lost or stolen

This is a disposable debit card prepaid with dedicated travel funds which you can access from over 457,000 Visa ATMs in 120 countries with a PIN that you select yourself. When your funds are depleted, you simply throw the card away. Since you can buy up to nine cards to access the same funds - useful for couples/families travelling together - it's recommended that you buy at least one extra as a back up in case your first is lost or stolen. There is a 24-hour Visa global customer assistance services centre which you can call from any of the 120 countries toll-free. The toll-free number to call if your card is lost or stolen while in Mexico is               1-800/847-2399       . In the UK, many Thomas Cook outlets sell the card

Major credit cards are widely accepted and handy for emergencies. Visa and MasterCard are the best; American Express and other charge cards are usually only accepted by expensive places, but an Amex card is worth it for the other services it offers, such as mail pick-up points and dollar travellers' cheque purchase. Credit cards are not accepted in the cheapest hotels or restaurants, nor for most bus tickets, but you can use them to get cash advances from banks. Usually there's a minimum withdrawal of around US$75-100.

In addition, you can get cash 24 hours a day from ATMs in most sizeable towns in Mexico, using credit cards or ATM cash cards from home. Banamex and Bancomer machines accept Visa and MasterCard plus debit cards from the Cirrus and PLUS systems, which allow account holders to withdraw money directly from their current/checking accounts back home. In some border towns you can find cash machines pay out in US dollars.

Make sure before you leave home that you have a personal identification number ( PIN ) designed to work overseas. Remember, too, that all cash advances on credit cards are treated as loans, with interest accruing daily from the date of withdrawal; there may be a transaction fee on top of this. Finally, be aware that technical hitches are not uncommon - though rare, it has been known for machines not to dispense cash but to debit your account anyway.

Wiring money is a fast but expensive way to send funds abroad and should be considered a last resort. Money can be sent via MoneyGram or Western Union and should be available for collection, from the company's local agent, within a few minutes of being sent. Fees depend on the amount being transferred and both companies charge on a sliding scale, so sending larger amounts of cash is better value. For example, wiring US$75/£50 to Mexico will cost US$21/£14 whilst US$1000/£700 will cost around US$60/£40.

It's also possible to have money wired directly from a bank in your home country to a bank in Mexico, although this is somewhat less reliable because it involves two separate institutions. If you take this route, the person wiring the funds to you will need to know the telex number of the receiving bank