I backpacked across Europe for about 3 months and it was an absolutely phenomenal experience that I will never forget - I'm sure you'll have a fantastic time! Sounds like you'll be visiting some great countries - Eurorail is such a great way to travel. Also, you might get the Go Europe book - it was literally my Bible while I was there - it gives you all the best sites to see, places to stay and eat, local customs, etc. - even in places off the beaten track. If you know any other languages that is really helpful of course, but if not, it's really good to at least have an English/(local language) dictionary to make an effort and Europeans generally appreciate that and will help you along.
How much money you bring really depends on how you plan to travel - if you're going Eurorail and staying in hostels it would be a different amount then if you're planning on staying in 4-star hotels and flying everywhere.
I always think it's a good thing to visit smaller towns and really get a feel for the area culture, however many of the major cities have amazing offerings that really shouldn't be missed.
Have an amazing time!
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