Budgeting Definitions

Question 1

Financial institution

Answer 1

An organization that provides banking or other financial services for customers.

Question 2

Banking

Answer 2

The deposit, loan, and similar services that financial institutions offer.

Question 3

Deposit insurance

Answer 3

Insurance to pay depositors back if the financial institution fails and is unable to pay them back themselves. This helps protect people’s deposits.

Question 4

The spread

Answer 4

Difference between interest they pay to depositors and the interest rate they charge to borrowers.

Question 5

Brick and Mortar

Answer 5

Relating to or being a traditional business serving customers in a building as contrasted to an online business.

Question 6

Formal trust

Answer 6

Often set up by lawyer and are established using a legal document called a deed of trust

Question 7

Informal trust

Answer 7

The only contract detailing the trust relationship is the financial institution’s investment contract or account documents. Can’t be closed or modified without beneficiaries agreement, doesn’t need a deed of trust, and is basically the same as a savings account.

Question 8

Inter vivos trust

Answer 8

Trust that is established when a person is still living which carries tax advantages, the flexibility to control your assets, and the ability to keep it confidential.

Question 9

Testamentary trust

Answer 9

Trust that is established after the grantors death

Question 10

Transactions

Answer 10

Any business done through your account, such as deposit, a cash withdrawal, a cheque, or a bank charge

Question 11

Overdraft

Answer 11

Fees that occur when you use more money than you have and it’s approved. Your account goes into the negatives and you have to pay a fee to the bank.

Question 12

Overdraft protection

Answer 12

The bank covers the cost of you spend more than what you have (to an extent) and you have to pay a fee that is smaller than a normal overdraft one. Pay for more flexibility when it comes to going over budget.

Question 13

NSF

Answer 13

Non-sufficient funds
NSF fees are triggered when you don’t have enough money to cover a transaction and the bank declines it.

Question 14

ATM

Answer 14

Automated teller machine
Allows you to deposit cash or cheques, withdraw cash, and check your account balance.

Question 15

CDIC

Answer 15

Canada deposit insurance corporation
Protects depositors by paying them back if the bank is unable to

Question 16

CDIC

Answer 16

Canada deposit insurance corporation
Protects deposits

Question 17

Post-dated cheque

Answer 17

A cheque for a specific future date that cannot be cashed in before that date

Question 18

Bank draft

Answer 18

Payment method where the issuing institution guarantees the funds
Typically when a large payment is required
Have to be in person
The recipient on the bank draft is the only person who can cash and deposit the funds

Question 19

Holds

Answer 19

A temporary delay in making funds available even when the funds appear in the account. Usually when cashing in a cheque.

Question 20

Clears

Answer 20

When funds are moved from the cheque writers bank to the bank of the person depositing the cheque.