I was recently asked, "What is the #1 college planning mistake made by parents today?"  Of course, there is no single "right" answer to this question.  Every family is different.  Every family has a unique set of circumstances - a unique level of income and assets, a unique mindset, a unique set of goals - all of which will impact the best college planning strategy for them as well as what their biggest college planning mistake might be.  

That said, a good candidate for the #1 mistake might be this:  saving for college in a vacuum.  That is, saving for college without taking into consideration other life goals and how the college financial aid process works.     

Why is this such a big mistake?  Surely if you put money away into a college savings fund each month you're doing your kids a favor, right?  Well, yes.  But you could probably be doing much more for your kids and yourself if you work within the context of a larger strategy.  

Let's look at three significant consequences to making "the big mistake":  

1. When you focus on saving for college, you're probably overlooking how to save on the cost of college.  The majority of families sending their kids to college don't pay the full sticker price that you see bantered about in the media.  In fact, most pay substantially less.  Finding ways to reduce your college costs by positioning yourself well for financial aid should be, for most families, a significant point of focus.  
2. Many parents look at the amount of savings that they've put together to pay for their children's college education and automatically assume that many expensive colleges are out of reach, especially private colleges.  But this frequently is not the case, especially if your child has performed well academically.  In fact, if your child is in the top 20% of the admitting class at the private school they would like to attend, there is a very good chance that they will be eligible for substantial "gift aid", which is financial aid that does not have to be paid back.    
3. A sole focus on saving for their children's college education frequently leads parents to forego their own retirement savings.  This can be a significant mistake.  Your kids will likely have several resources for financial assistance to attend college but you won't have that luxury in retirement.  Outside of social security and any pensions that you might have coming your way (which have become very rare these days), funding your own retirement is up to you.       

What can you do to avoid savings for college in a vacuum?  Start by thinking about how you'll help fund your children's college education within the context of your overall financial plan and life goals.  Second, get familiar with the financial aid process and how to best position your assets and income to improve your odds of maximizing free aid.  As it turns out, this is a very complex subject, but you can learn more by visiting the College Planning Primer section of our College Planning Services website.  Click here to learn more:  College Planning Services

Greg Pierce is a Fee Only financial planner located in St. Louis, MO, who specializes in helping people make smart decisions in retirement planning, college education planning, tax planning, investments and more.