Ask any parent what his or her greatest financial fear is and chances are, you'll hear "paying for college" more than once. Funding an education has become exceedingly difficult given the ever-rising cost of tuition, and if your goal is to help your kids avoid student loans to the greatest extent possible, you'll need to save somewhat aggressively for their education.

But there's a difference between saving for college and doing so efficiently. And if you fall victim to these mistakes, you might sorely regret it when the time comes to start writing out those tuition checks.

Group of young adults gathered around a laptop outdoors


1. Not keeping up with current college costs

The cost of college today looks very different than it did 10 years ago. If you don't keep tabs on the expenses you'll face, you'll risk coming up short. Here's what annual tuition costs, on average, based on the 2019-2020 academic year:

  • $3,730 for community college
  • $10,440 for public four-year in-state college
  • $26,820 for public four-year out-of-state college
  • $36,880 for private non-profit four-year college

And that's just tuition. Room and board can add anywhere from $8,990 to $12,990 on average each year to the numbers above. The takeaway? Know what you're in for. It'll help you determine whether you need to ramp up on the savings front, and also, whether it pays to sit down and have an open conversation with your kids about the types of school they should and should not be applying to.

2. Not saving in the right plan

Though you don't get a tax break for putting money into a 529 plan, once that account is funded, your money gets to grow tax-free. Withdrawals are also tax-free -- provided they're used for qualified education expenses. When you save for college in a bank or traditional brokerage account, you don't get any tax benefit.

Of course, one drawback of 529s is that any funds withdrawn for non-education purposes are subject to a 10% penalty. But that applies to the gains portion of your account only, not your principal.

If you'd rather not run the risk of getting stuck with excess funds in a 529, you can save for college in a Roth IRA, instead. You'll get the same benefits of tax-free growth on investments and tax-free withdrawals, and if you wind up with more money than you need for educational costs, you can use the remainder as retirement savings (which, let's face it, you can't have too much of).

3. Not encouraging your children to work for college money

While you may be making a solid effort to sock funds away for your kid's education, covering the entire cost of four years of college is no easy feat. That's why it pays to encourage your children to contribute to their own savings by working and banking their earnings. And if they're not particularly motivated to do so, remind them that Americans owe an almost ridiculous $1.59 trillion in student loans and having a pile of debt to pay back is hardly a fun way to kick off young adulthood.

The fact that you're even making an effort to save for college is something you should be proud of. Avoid these mistakes and you'll be putting yourself in the best position to help your children get the education they need.