Why Invest for Education?
Islam requires everyone to seek knowledge and become educated. Higher education costs have been rising at twice the rate of inflation every year and it may not change in the foreseeable future.
The Prophet Muhammad (Peace be upon him) encouraged us metaphorically by saying “Seek knowledge, even in China.” The education of our children is our obligation. We look forward to it with optimism but also apprehension. Skyrocketing tuition, far outpacing inflations makes it necessary for you to plan well ahead. But what are the options?
Allied Asset Advisors aims to empower its investors to be prepared for the education of future generations while upholding their beliefs.
Understanding college expenses
Often parents don’t realize that educational expenses are more than just tuition. They may include
Room and board
Commuting expenses
Student activity fees
Lab and other fees
Special equipment
Miscellaneous expenses
Estimated One-Year Future College Costs
Assumes 6% Annual inflation
*These estimates have been calculated using the College Cost Calculator at the College Savings Plans Network. If you like, you can calculate the costs yourself, too.
Setting investment goals
if you start investing today
The figures calculated are based on a hypothetical scenario. The performance shown is not indicative of any particular investment. Actual results will vary.
Sources to pay for college
Financial aid packages (Federal, State, College)
Not always reliable. Composition may not be halal. Repayment is interest based.
- Loans (Largest share in the package, repaid, interest based)
- Grants (Not repaid, need + merit based)
- Scholarships (Not repaid, limited, competition)
- Work-Study Jobs (Repaid in terms of work)
You must learn how an Estimated Family Contribution is calculated to determine the amount of financial aid or eligibility.
college savings resources
College Savings Resources
Clicking on the links below will take you to a third party site. The Iman Fund is not responsible for the content, nor does it sponsor any information provided on a third party site.
www.collegeboard.com
www.savingforcollege.com
www.smartmoney.com/college
www.irs.gov
Family Investments and Savings
This may be your most reliable option. Your investments can be halal and have the potential to grow sufficiently based on the amount you invest.
Private or Foundation Scholarships and Grants
There are thousands of applicants for only a few scholarships or grants. The chances of getting them are often small due to high demand.
Tools for investing in education
Section 529 college savings plans
Tax-free growth. Prepaid tuition plans allow you to buy credits at today’s cost – could be halal. These investment plans are not halal.
Coverdell Education Savings Accounts (CESA)
Used only for education – could be halal. Learn more about Iman Funds CESA accounts.
Mutual funds and stocks
Diversified, professionally-managed, and offer potential for long term growth. These could be halal.
Islamic Savings Bonds – Sukuk
Fixed income – could be halal.
Custodial accounts
Flexible use of the child’s fund. Can be transferred to another child, however, the funds may only be used for educational purposes.
Earning Tax Credit
Lifetime Learning and American Opportunity.
Financial aid: Estimated Family Contribution (EFC)
Your child’s eligibility for financial aid is based on many factors such as family income, parent and child assets, and investments. An EFC formula using federal institutional methodology is applied to determine EFC or your child’s financial aid need.