Chapter 14 Flashcards
What is saving and investing? How does the risk vary between the two?
Saving means putting money aside for future use. Investing is using savings to earn extra income.
What percentage of your income should you put away for savings?
20%
Define inflation.
Inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money.
What does saving for a rainy day mean?
is a reminder to “put something” aside for a future time of need or setting aside some funds to cater for needs when your account balance may not be sufficient at a later date.
How much of your paycheque should you set aside?
50/30/20
What is liquidity?
Liquidity is the ability to convert an asset or investment into cash quickly and easily.
Whats an Registered Retirement Savings Plans (RRSPs)?
Registered Retirement Savings Plans (RRSPs)
- Registered with federal government
- Used to save for retirement
- Offers tax advantages
- RRSPs allow individuals to invest a portion of their yearly
income without paying income tax on it until they withdraw it. - income tax is deducted off peoples pay cheques, those who invest in RRSPs receive the income tax paid when they file an income tax return.
- Government limits amount you can contribute
- Contributions made early in one’s life generate larger returns
Whats an Registered Education Savings Plans (RESPs)?
Registered Education Savings Plans (RESPs)
Designed to help finance a child’s post-secondary education
Income earned is tax-free until the child attends an approved post- secondary school full time.
Lifetime contribution is limited to $50 000.
Mutual fund?
A mutual fund is a lot of money from many investors
By an investment company (who sets up and manage) to buy & sell securities of other corporations
When a mutual fund is invested, the professional investment managers make the decisions for you
Common stock?
Common Stock is a class of stock that represents the equity ownership in a corporation, the owners of common stock are called shareholders. This ownership allows shareholders to have voting rights at board meetings but they can only vote one vote per share, but shareholders may also be aloud to establish deviations from the one vote per share rule.
Preferred stock?
-Preferred stocks is type of stock that shares similarities with normal stocks and bonds. just like bonds, preferred stocks payout cash, but with a higher yield and higher dividend returns and a less of a risk compared to a normal stock.
Government bonds?
-A government bond is a debt security issued by a government to support government spending and obligations. Government bonds can pay periodic interest payments called coupon payments. Government bonds issued by national governments are often considered low-risk investments since the issuing government backs them.
Corporate Bonds?
A corporate bond is issued by a business to raise money
It is a definite promise to repay borrowed money along with the interest on a certain date
Guaranteed investment certificate?
-A guaranteed investment certificate is a Canadian investment that offers a guaranteed rate of return over a fixed period of time, most commonly issued by trust companies or banks. Due to its low risk profile, the return is generally less than other investments such as stocks, bonds, or mutual funds
Term Deposit?
A term deposit is a fixed-term investment that includes the deposit of money into an account at a financial institution. Term deposit investments usually carry short-term maturities ranging from one month to a few years and will have varying levels of required minimum deposits.
