Hi guys and gals!
My friends and I are planning our 3 month trip across Europe for next year, starting march 2008. I'm in the principal stages of planning and am trying to establish a rough outline for how much i need to save between now and then.
So far I've got:
£2908 for €50 a day spending money at current exchange rate.
£830 for 3 continuous month Interrail tickets (this is the most expensive scenario, pending route planning)
But how much money do you guys think we need to budget for hostels? Obviously it's hard to guage without knowing exactly where we're going as different regions are more expensive than others, but what's a good average cost that would cover an even mixture of the cheaper and more expensive regions. We're not looking for hotels really, just a place to provide the basic necessities of living.
Any help or general suggestions are MUCH appreciated. My head is swimming with the barage of info I've taken in over the last few days!

One way I save for trips. Get a big display bottle from a liquor store. One that will accept quarters, through the top.
Paste pictures of places you reeeaally want to see, on the sides of der bottle.
All change goes in, every night.
You won't miss it, the next day.

It depends a bit on where you're going, but I'd say plan on an average of 20-25 Euros for hostel beds. Some places might be more expensive (Britain, Scandinavia, etc.), while others (some southern countries like Greece, Portugal, Eastern Europe, some small towns) will be a bit cheaper.
You can look on sites like www.hostelworld.com to get a sense for prices in various cities.
I should note that sometimes it can work out slightly cheaper to get a budget hotel or private room for a group of people, rather than individual hostel beds. That might not impact your budgetting necessarily, but it's something to keep in mind as you start planning.
You're in pretty good shape, budget wise. Depending on where you're going, 50 Euros a day is a low budget. The bare minimum is probably around 35 or 40 Euros. You have a bit more than that -- you'll still need to be careful, be smart, and watch your finances. But you'll also be able to splurge occasionally on a nice, sit-down dinner or a night on the town drinking or at clubs at that budget.
Dave
How many friends? The less who actually go, the luckier you'll be. Europe can be the background for a long tiring party. And not see much, that each one really wanted to see. You have to keep each other happy.
Solo for me, from now on.
One objection to us yanks is; Wre only talk to the people we travel with.
Share ideas with other "foreigners."
You'll get more out of it.
Don't just do something. Sit there.
Absorb.
imho
8-:o)
Let's see... $20 a day including accomodations, food and touristy expenses. Yup, that's what the bicycle can do for you.

Depending whare you stay you will get by on 15-20 euros per night, that should be the average for your entire trip. There are plenty of good lean cheap hostels available in the major cities for this amount per night.
Remember to visit some of the Eastern countries as that will extend you money further.