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A bond is a security issued by governments and companies. Bond indentures (contracts) detail the amount and frequency of payments the borrower (issuer) must make to pay back the debt.

A budget is an exercise in planning a household’s income and expenses as accurately as possible for a given period (usually one year).

The principle behind diversification is the old maxim “Don’t put all your eggs in one basket.”

In the context of investing, diversification is a financial strategy that consists of choosing different types of investments. The objective is to reduce risk so no one event will affect the entire portfolio.

An exchange or stock exchange is a market where investors can buy and sell securities such as shares and options. In order for a company to be listed on an exchange, it must meet certain criteria and regulations relating to accounting practices and information for shareholders, for example.

Financial literacy
Financial literacy means having the knowledge, skills, and self-confidence you need to make responsible financial decisions.

Fringe benefits
Fringe benefits are all forms of non-salary compensation an employee receives from their employer.

Guaranteed investment certificate (GIC)
A guaranteed investment certificate (GIC), also called a certificate of deposit or term deposit, is a security indicating that an investor has lent money to a financial institution.

The primary feature of this type of investment is that the interest paid by the financial institution is guaranteed and the money loaned plus the interest is paid back only at the end of the term.

Inflation is the widespread increase in the price of goods and services. It is the opposite of deflation.

All of an individual’s assets that are passed on to their heirs after his/her death.

Interest is a percentage of an amount, paid at a given frequency (for example, 2% per year). It is paid by the borrower to compensate the investor for lending them money. Essentially, it is the cost of borrowing money.

Conversely, when you deposit money in your bank account or make an investment, your bank uses that money for other purposes and compensates you by paying you interest. This is one way you can make money with your money!

Life insurance
Life insurance is a contract between the insurer and the insured whereby, in exchange for a sum of money called a premium, the insurer agrees to pay the beneficiary an agreed-upon amount on the death of the insured.

Mutual fund
A mutual fund is made up of money pooled by multiple investors and used on their behalf by a manager to buy shares, bonds, or other securities in line with the fund’s objectives.

When you invest in a mutual fund, you receive a unit or share that identifies what portion of the fund belongs to you. This share entitles you to receive your portion of the income generated by the fund (which may be positive or negative).

Pension fund
A pension fund, or supplemental pension plan (SPP), is a pension plan that an employer sets up for its employees.

Purchasing power
A person’s purchasing power is their capacity to buy goods and services with a given amount of money.
When a person’s income increases less than inflation, their purchasing power diminishes.

A return is the gain you earn on your investment in the form of interest income, dividends, or capital gains.
The return is often calculated as a percentage. If an investment of $1,000 earns $20 per year, then the rate of return is 2% ($20 ÷ $1,000 = 2%).

When you are unable to predict the outcome of an event, there is uncertainty. “Risk” is a quantified measurement of that uncertainty.

Suppose a company is unsure what its future profits will be. If we use the “range of potential profits” to measure this uncertainty (the risk), the greater the range, the greater the risk.

Salary insurance
Salary insurance pays out disability benefits, usually on a monthly basis, to an insured who is unable to work due to an illness or accident.

Share (Stock)
A share, also referred to as stock, is a security issued by a company that recognizes ownership interest.

Those who own shares (shareholders) own part of the company, in a proportion equivalent to the number of shares they hold out of the total number of shares issued by the company.

Social programs
Programs administered by the government that pay out benefits when certain events occur (e.g., unemployment, retirement, illness, parental leave).

Some of these programs depend on how much the taxpayer pays into them, while others are universal.

A tax-free savings account (TFSA) is a savings vehicle available to Canadians that allows deposited funds to grow tax-free.

The lack of certainty or sureness of an event.