Welcome to the A - Z of the finance world!

In order to be "financially literate," parents and students need to have a working knowledge and understanding of the many terms that help us make sense of the financial world. In this section of the web site, you will find financial terms related to Investment and Business, Buying and Leasing, General Business, Insurance and Home Buying, Taxation, and Wills and Estates.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


A

Advisor: a professional who assists clients with planning and arranging their financial affairs.

Amortization: the period of time over which you agree to pay back a loan — such as a mortgage — via a series of regular payments.

Appraisal: the estimate made of the value of a property.

Asset: is something you own that has value.

B

Bank of Canada: Canada’s central bank that holds the responsibility, among other things, of influencing the money supply, interest rates, and spending to keep prices relatively stable and protect the purchasing power of Canada’s money.

Bartering: when one item is exchanged directly for another without using money.

Benefactor: a person who receives money or assets as indicated by a will from someone who has died.

Beneficiary: the person who will receive funds paid by a life insurance policy if, or when, the policy holder should die.

Bond: a way in which governments and companies can borrow money. A bond can be sold for a period of time and bondholders will be paid a set amount of interest. On the maturity date, the money will be repaid to the bondholder.

Bond market: where bonds are bought and sold at a market price.

Broker (or stock broker): a person trained and licensed to buy and sell stocks.

Budgeting: listing monthly income and expenses to keep track of where your money is going and to make sure your money is being used wisely.

C

Canada Education Savings Grant: grant program of the federal government to provide money to help people save for post-secondary education and training.

Canada Learning Bond: a federal government program to provide assistance to lower income Canadians to help them save for post-secondary education and training.

Capacity: your ability to make payments on a loan — usually determined by your income.

Capital: the assets you own — things of value — things that could be sold or cashed in, if needed, to help pay back a loan.

Capital gain: is earned when an asset is bought at one price and sold at a higher price.

Career path: various career stages over the course of one’s life. Many people will have multiple jobs over time building up to a career path.

Career plan: the steps and strategies taken to explore career options, set career goals, and obtain the required education, training and experience to achieve career goals.

Carrying cost of a debt: the interest charges that you pay on debts that you carry on a credit card over time. That is, credit card debts that you don’t pay off right away and result in interest charges.

Caveat emptor: “buyer beware,” which means that, in the end, a consumer is largely responsible for each decision that is made.

Character: things about you that indicate your degree of stability, responsibility, and reliability.

Co-signer: a person who signs a loan agreement who is willing to pay back the loan, or what is owing on a loan, if the borrower can’t repay.

Collateral: something of value that you put up in support of a loan and that could be sold, cashed in, or given to the lender if a loan can’t be repaid.

Compound interest: when savings earn interest, and the interest is added to the savings, this enables the savings to grow and earn more interest. Over the years more and more interest is added and this helps to build up the value of savings.

Consolidation loan: one loan taken out to pay off a number of debts to make one payment monthly rather than a number of payments to hopefully reduce the monthly cost.

Consumer rights: these are what a consumer should reasonably expect in the course of fair dealings and expectations with a producer or retailer.

Covering letter: a letter written to accompany a résumé and is written specifically for a job for which you are applying.

Credit rating: a score that indicates your history of managing and paying your bills and debts.

Creditor: is someone who lends money to others.

D

Debtor: is someone who borrows money from others.

Defined benefit pension plan: a pension plan where the provider (company, government, etc.) commits to providing a certain amount of income each year when the employee retires.

Defined contribution pension plan: a pension plan where the provider commits to contributing a certain amount each year to the plan. There is no commitment to an annual payment in retirement.

Depreciation: the gradual decline in the value of an asset from when it is new (full value) to when it has no value.

Disability insurance: protection you can buy to provide an income in the event of a long-term illness or disability.

Distribution of income: the portion of total income produced in an economy received by the various members of the population — or groupings of the population.

Dividend: the shares of a company’s profits that are given to shareholders.

E

Economic growth: an increase in the quantity of goods and services produced by an economy.

Employment insurance: a program which governments can use to help provide funds to people who become unemployed — if the person qualifies for the benefit.

Enterprising person: someone who applies entrepreneurial characteristics and skills to any kind of endeavour.

Entrepreneur: a person who recognizes an opportunity (need, want, or problem) and uses resources to pursue an idea for a new, thoughtfully-planned venture.

Entrepreneurial opportunity: a need, want, or problem for which a reasonable number of people (to make a venture viable) would welcome a solution.

Envy: the desire to have what others have, look like others look, live like others live, etc. This is a pressure you usually put on yourself.

Equity: an asset that has value. The value of the asset may change over time.

Estate: the money and assets left by a person upon death.

Exchange rate: the value of one country’s currency in terms of the currency of another country.

Executor: the person or persons responsible for seeing that an estate is settled according to a will.

F

Fiat money: when money has no value in and of itself but only in terms of the value it represents and what it is able to buy — its purchasing power.

Financial independence: having access to enough income to enjoy life without having to work if you do not wish to do so. You are not reliant on others for the money you need to live.

Financial planning: setting goals for things you hope to achieve and acquire over time and making a plan for how to achieve those goals.

Fixed costs: the costs that come up on a regular basis that you have to pay each month.

Fixed income investment: an investment with a fixed interest rate that does not change.

Foreign exchange market: locations where the currency of one country can be exchanged for the currency of another country.

G

General insurance: provides protection against the loss, damage, destruction, or theft of property.

Guaranteed Annual Income Supplement: a government benefit provided to seniors who are in need.

I

Inflation: a rise in the average price level of goods and services in the economy.

Insurance: protection you can buy for the risks we may face with things we own, our health, and our life.

Intensity of feelings: how strongly you feel about something. This is hard to measure or put a number on. But it will be important in making decisions.

Intrinsic value: when money has value in and of itself. For example, money made from gold or silver.

Investor profile: a description of the type of investor a person is in terms of goals, comfort with risk, knowledge of investing, etc.

Irregular costs: the costs that come up every now and then and for which you have to plan for to be able to cover.

L

Legal tender: the official money in a country that is widely accepted.

Liability: is something that you owe.

Life and health insurance: provides financial protection for the possible loss of income due to illness, disease, disability, or loss of life.

Life cycle: the different general stages of life people commonly go through where circumstance, priorities, and goals change over time.

Liquidity: the ease with which an investment or asset can be converted into cash — and the certainty of its value.

M

Medium of exchange: one of the roles of money. Prices can be set in terms of money for goods and services and then money can be used to “exchange” to receive a good or service.

Metacognition: thinking about your thinking — and to pause and take time to think about what you are going to do — and any decision you are about to make.

Minimum wage: the lowest wage that an employer can legally pay an employee.

Mutual fund: funds pooled by investors and managed/invested on their behalf by a professional “fund manager” for a fee. Funds differ in terms of the kinds of investments held by the fund.

N

Net worth: your assets (what you own) minus your liabilities (what you owe.)

O

Old Age Security (OAS): a government benefit provided to seniors.

Opportunity cost: the next best alternative given up, when you make a decision.

P

Peer pressure: the influence that others, around the same age, can have on your actions and decisions. This is a pressure that others try to put on you.

Permanent life insurance: permanent protection that will provide funds to others (your “beneficiaries”) when you die.

Portfolio: a collection of investments held by an investor.

Premiums: the monthly amount you will pay for an insurance policy and insurance protection.

Principal: the amount of money borrowed that has to be repaid. It does not include any interest charges that have to be paid for borrowing money.

Purchasing power: the ability of money to acquire goods and services. As prices rise, the purchasing power of money falls.

R

References: letters or comments from people you know regarding your abilities, characteristics, skills, etc. that an employer may refer to in making a hiring decision.

Registered Education Savings Plan (RESP): a means to save for children’s education. Money deposited to the plan is not tax-deductible.

Registered Retirement Savings Plan (RRSP): a means of saving for retirement. Money deposited each year is tax deductible up to a certain maximum. Money is taxed when it is taken out of an RRSP.

Résumé: sometimes called a “curriculum vitae,” or “CV”, this is a summary of your work, education, and experience as well as other abilities you have that make you a candidate for a particular job.

S

Salary: the annual amount paid to a worker.

Self-efficacy: your belief in your ability to accomplish goals and tasks.

Stock exchange: where buyers and sellers come together (not physically) to buy and sell stocks with the help of stockbrokers.

Stock market: where stock (shares of companies) are bought and sold at a market price.

Stocks or shares: represent part ownership in a company. “Shareholders” will receive a share of company profits based on the number of shares owned — if the company makes a profit and profits are distributed.

Store of value: one of the roles of money whereby it is possible to save money rather than spend it and try and increase its value in the future.

T

Tastes and preferences: our own individual likes and dislikes that can affect what we buy, what we do, what we eat, where we shop, what we wear, and so on.

Term life insurance: temporary protection, to a certain age, to provide funds to others (your “beneficiaries”) if you should die — to help others with expenses they face — or will face. Term life insurance is paid if you die.

Time horizon: the period of time when you will need to turn investments into cash to use the money.

U

Unit of account: one of the roles of money where we are able to set prices in terms of money to reflect the value of a good or service.

V

Values: the beliefs, morals, attitudes and decisions that make up your character, affect what you do in life, how you handle situations, and your goals.

W

Wage: the hourly rate paid to a worker.