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242 Cards in this Set
- Front
- Back
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Define needs |
Things you have to have
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Define wants |
Things you would like to have |
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What are the 3 categories of needs and wants? |
1. Necessary needs - obvious things every person needs to survive 2. Slightly less necessary needs - our own circumstances that dictate some other needs 3. Pure wants - everything else |
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What are the 6 steps to making a good decision? |
1. Clearly define the problem 2. Establish your criteria 3. List your alternatives 4. Evaluate the alternatives 5. Make a decision 6. Review the decision |
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List and describe the 8 factors affecting money decisions |
1. Emotions - emotional response when looking at the item
2. Friends and peers - peer pressure; your friends and what you thought they would think about your choice 3. Customs, traditions, and habits - maybe it's the style of clothes you have always tended to wear in the past 4. Family members - influence from what your parents, siblings, or other family members would think or how they would react 5. Latest styles and fads - trying to stay current with trends 6. Advertising - because of a commercial, ad, promotion, or celebrity endorsement 7. Incentives - because of a "sale" or discount coupon to make you buy the product 8. Your values and confidence - Because of what you thought and what you wanted; your own sense of values, style, and knowing what you want |
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What are 4 tips for making good money decisions? |
1, Think about your thinking
2. Opportunity cost 3. Future trade-offs 4. Affordability |
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How can setting goals help you make better money decisions? |
-If you have goals, you'll have to consider the possible trade-offs as you make decisions
-Saving to achieve a goal can be very rewarding, personally satisfying, a real motivator, and a confidence builder -Achieving a goal can help you prove to yourself you can accomplish goals |
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Define medium of exchange |
Things we use for purchases
(ex: money) |
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Define opportunity cost |
The next best alternative given up when making a decision
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Define financial planning |
Planning how to handle money; setting goals for things to achieve and acquire and planning to achieve those goals
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Define carrying costs of debt |
The interest changes that you pay on debts carried on a credit card for a long time
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List and define the 11 decision making strategies |
1. Agonizing - Accumulating so much information that analyzing the options becomes overwhelming 2. Avoidance - Choosing the option that is most likely to avoid the worst possible result 3. Compliance - Going along with family, school, work, or peer expectations 4. Desire - Choosing the option that might achieve the best result, regardless of the risk involved 5. Destiny - Letting outside forces decide; leaving the decision up to fate 6. Inspiration - Doing something because "it feels right" or because "it just seems like the right thing to do" 7. Intention - Choosing an option that will be both intellectually and emotionally satisfying 8. Procrastination - Postponing thought and action until options are limited 9. Security - Choosing the option that will bring some success, offend the fewest people, and pose the least risk 10. Spontaneity - Choosing the first option that comes to mind; giving little or no consideration to the consequences of the choice 11. Synthesis - Choosing the option that has a good chance to succeed and which you like the best |
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List 10 things that can influence your values |
1. Family members 2. Teachers 3. Friends 4. Religion 5. Culture and heritage 6. Television 7. Movies 8. Videos 9. Music 10. Advertising |
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What is peer pressure? How can it affect your decisions? |
-Influence from those around us
-May make us make decisions related to alcohol, smoking, clothing fads/styles, courses you take, concerts, schools, careers, jobs, etc. -May also influence how much we spend, what we buy, how much we borrow, what styles we follow, where we shop, etc. |
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What does "keeping up with the Joneses" mean? |
-Struggling to keep up with everything those around us have-We may want what they have or try to live how they live
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Why is advertising good for us as consumers? |
1. It informs us of new products, existing products, and improvements/changes to products
2. It encourages competition, which can lead to product improvements, lower prices, specials, improvements in supply and availability, etc. 3. It pays for many media presentations. It sponsors TV and radio shows, magazines and newspapers, concerts, etc. "Product placement" helps sponsor movie production 4. It can make shows, magazines, concerts, etc. cheap or free for consumers 5. It helps consumers compare different products and services available, hopefully helping them make better consumer decisions |
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What are the 10 different types of advertising techniques? |
1. Repetition
2. Conformity 3. Imitation 4. Emotional appeal 5. Good will 6. Scare techniques 7. Snob appeal 8. Economic appeal 9. Comfort and enjoyment 10. Humour |
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How does luck of the draw affect goal setting? |
-We were all born into individual circumstances
-We enter into different economic circumstances, geographical locations, cultures, family conditions, and values -We don't all have equal opportunities-Some people may have easier access to money, while others have to work much harder |
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How does the life cycle affect goal setting? |
-Over time, and at different stages of life, our priorities and concerns can change; goals of someone who is 15 may differ from someone who is 65
-When setting goals, you have to consider the changes that will occur throughout what is called the "life cycle" -Taking control of financial affairs means thinking about the various stages of your own life cycle; you can't just think about what is important today, you also have to think about what will be important in the future |
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How do tastes, preferences, and lifestyle affect goal setting? |
-We make goals according to what we like-What type of home do you want?-What kind of workplace environment do you want to work in? |
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How does the economy affect goal setting? |
-Rate of inflation
-Interest rates -Government programs -Status and strength of labour unions -Exchange rate for the Canadian dollar -Availability of jobs -Stock market, bond markets, etc. -Tax policies -What goes on in other countries |
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How do social factors affect goal setting? |
-Changes in our society can affect our living conditions and our tastes, preferences, and goals
-Social changes like having children, family size, getting married, level of education, housing styles, popularity of certain careers, new jobs available, etc. can all have a bearing on our financial decisions and plans |
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How do political factors affect goal setting? |
-Governments play a significant role in our society
-Government decisions can affect the prices of goods and services we buy and the taxes we pay, the availability of certain jobs, the quality cost, the availability of healthcare/education/training programs, pension plans, housing costs, etc. |
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How do language and communication skills affect goal setting? |
-Decision making involves communicating with others to get information you need to make decisions and set your goals
-Some people may have language or communication challenges -Those who get ahead and succeed are often those who have been able to get new and relevant information and factor it into their decisions |
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How does prejudice affect goal setting? |
-It can have an effect on an individual's ability to get a job, access opportunities that are available, receive quality service, impact one's level of confidence and income potential, etc. |
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In what way can we classify the length of our goals? |
• Short-term goals - 1 to 4 weeks
• Medium-term goals - 2 months to a year • Long-term goals - 1+ years |
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What is a SMART goal? |
• Specific - well defined so anyone can understand the goal
• Measurable - needs to have parameters in order to know if the goal was achieved • Attainable - must be a realistic goal that challenges you • Relevant - make sure the goal is consistent with your other goals and will aid you in achieving your long term goal • Timely - create a time frame for when you want to accomplish your goal |
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Write a SMART GOAL |
• S - I will improve my health by consuming 60 grams of protein and 2 litres of water daily • M - I will lose 3 kg by increasing my activity level and decreasing my calorie intake • A - I will reduce my sugary drink consumption by 2 drinks every week in order to eliminate my consumption over the course of a month • R - I will improve my lifestyle by making conscious food decisions at every meal while focusing on protein and vegetables • T - I will achieve my ideal weight by December 31st 2013 |
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What is economics? |
The study of how people choose to use resources
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What are economic resources? |
-Time and talent people have available
-Land -Buildings -Equipment and other tools on hand -Knowledge of how to combine everything to create useful products and services |
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What do economists measure? |
Well-being:
-To learn how it may increase over time -To evaluate the well-being of the rich and the poor |
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What is scarcity? |
When there isn't a lot of something or it isn't always available
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List 3 items that are non-scarce |
-Air
-Salt water -Dirt |
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*What are the 3 categories of economic resources?* |
• Land - natural resources, minerals, wild animals, vegetation, and water
• Labour - skills, level of education, and technical training of individuals =• Capital - buildings, factories, equipment, computers, tools, lathes, drill presses, fork lifts, trucks, conveyor belts, etc. |
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Define direct costs |
Out of pocket expenses that are required to do something
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Define opportunity costs |
The value of the next best possible alternative that is sacrificed
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Define total cost |
The total of both direct and opportunity costs
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Explain the concept of calculating opportunity cost |
-You need to compare each opportunity in terms of its benefits and costs
-Decide which one's best -List what the opportunity cost is |
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Give a monetary and non-monetary example of opportunity cost |
*MONETARY* -If a student is willing to trade $4 for a large bag of chips, what is the opportunity cost of a large bag of chips? -Opportunity cost is $4 *NON-MONETARY* -If a student is willing to trade 20 pencils for 5 pens, what is that opportunity cost for a pencil? -Opportunity cost is 1/4 of a pen |
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Define goods |
Items that can be seen and touched
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Define services |
Assistance provided, usually in return for payment, that satisfies the needs and wants of people or businesses, but does not result in a product that can be touched
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Define price |
Decided by the price mechanism; the demand and supply of the good/service
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Define consumer |
A person who buys goods and services; also referred to as a customer
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Define producers |
Free to produce what they want, how much they want, and for whom they want to produce
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Define marketplace |
The location in which consumers and producers buy and sell their goods and services
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Explain the role of the consumer |
Free to choose
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Explain the concept of demand |
How much of a product or service is desired by buyers
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Explain the concept of supply |
How much the market can offer
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Explain the concept of equilibrium |
When supply and demand are equal
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Explain the concept of surplus |
-When the supply of goods and services produced are in excess of the demand
-Usually happens because of high prices |
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Explain the concept of shortage |
-When the amount of supply demanded is higher than the amount of goods and services being produced
-Usually occurs when the price is set too low |
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List and describe the factors that increase or decrease supply and demand |
INCREASE: -Changing consumer income -Changing consumer tastes -Changing expectations for the future -Changes in population DECREASE: -Change in the number of producers -Changes in price -Changes in technology -Changing expectations for the future -Changing production costs |
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What is price elasticity of demand? |
The measure of how much quantity demanded changes relative to price changes
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What is elastic demand? What is inelastic demand? |
• Elastic demand - when the quantity demanded changes according to the price • Inelastic demand - when the quantity demanded changes relatively little |
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What factors tend to affect the price elasticity of demand? |
-Product substitutes
-Expense of the goods and services -Time consumers have to adjust to price changes (they will increase purchases in response to price decreases, and will decrease purchases in response to price increases) |
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What are 3 sources of income? |
-Wages and salaries -Inheritance -Lotteries and gambling |
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List the 11 factors that can affect your wage or salary |
-Level of education, training, and experience required/acquired
-Number of people more qualified -How good you are at the job -Seniority -Work habits, reliability, dependability, perseverance -State of the economy -Government legislation -Impact of unions -Labour/market conditions in your region -Profitability and success of your workplace -Luck and chance |
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Are lotteries legitimate sources of income? |
Although you do receive income from them, they are not legitimate in the fact that they're not consistent or reliable |
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What is the need for financial institutions? |
-Deposit money
-Save money -Keep money safe -Provide loans to individuals and businesses -Help individuals and businesses perform monetary transactions |
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Define account |
Money deposited with a financial institution for investment and/or safekeeping purposes |
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Define assets |
Items of monetary value (ex: house, land, car) owned by an individual or a company
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Define ABM |
Automated banking machine
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Define ATM |
Automated teller machine
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Define balance |
-An outstanding amount of money
-In banking, balance refers to the amount of money in a particular account -In credit, balance refers to amount owed |
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Define bank |
An establishment for lending, issuing, borrowing, exchanging, and safeguarding money
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Define certified cheque |
A cheque issued by a bank, drawn on its own funds rather than on one of its depositors
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Define credit union |
-A member-owned financial institution, either provincially or federally chartered -Often more competitive than banks and trust companies because its nonprofit status makes its operating costs lower |
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Define debit card |
-A banking card enhanced with ATM and point-of-sale features that can be used to purchase goods and services electronically
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Define internet banking |
Allows a person to conduct banking activities such as transferring money between accounts of paying bills from their personal account using the internet
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Define interest |
-The fee paid for the use of money -Interest may be paid, for example, by an individual to a bank for credit card use, or by a bank to an individual for holding a savings account; interest is expressed in terms of annual percentage rate (APR) |
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Define joint account |
A savings or chequing account established in the names of more than 1 person (ex: parent/child, wife/husband) |
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Define mortgage |
A long-term loan obtained by individuals to buy a home that legally transfers ownership from the debt or to the creditor until the debt is paid
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Define NSF |
Non sufficient funds |
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Define NSF cheque (bounced cheque) |
A cheque that a bank has refused to cash or pay because there are not enough funds in the cheque-writer's account to cover the amount written on it
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Define overdraft |
-A cheque written for more money than is currently in the account -If the bank refuses to cash the cheque, it is said to have "bounced" |
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Define passbook (bank book) |
A booklet given by the bank to the depositor to record deposits, withdrawals, and interest earned on a savings account
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Define Personal Identification Number (PIN) |
A unique number of code entered by a customer when using an ATM or INTERAC, PLUS, or CIRRUS service |
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Define reconciliation |
Checking all bank account papers to make sure that the bank's records and yours agree |
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Define savings account |
A bank account that accrues interest in exchange for the use of money on deposit
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Define service charge |
A monthly fee a bank charges for handling an account |
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Define stop payment |
-A request made to a bank to not pay a specific cheque
-If requested soon enough, the cheque will not be debited from the payer's account -Normally there is a charge for this service |
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Define withdrawal |
An amount of money taken out of an account in cash, by cheque or debit card, or by automatic withdrawal
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What is the bank act? |
-1871
-Regulated the way banks in Canada can operate -Its purpose was to make sure that banks across the country operated under similar rules to protect consumers -Outlines the procedures for opening new banks, forming mergers, and gives details of what banks can and cannot do -Was revised in 1980 to allow foreign banks to enter the Canadian marketplace -Revisions are completed regularly to provide Canadians with the most up-to-date banking services. The last revision was completed in 2010 |
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What is the Bank of Canada? |
-Responsible for issuing money within Canada
-Not a chartered bank and consumer cannot open an account with this bank -Plays a key role in the Canadian economy by setting the bank rate, also known as the prime lending rate -The prime lending rate is a symbolic move to banks, trusts, and credit unions to raise or lower their own lending rates, but they do not have to do so |
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What are the 5 major banks in Canada? |
-BMO
-Scotiabank -RBC -CIBC -TD |
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Name 3 local credit unions |
-Conexus
-TCU -Affinity |
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What are the 3 different schedules of banks? |
Schedule I Schedule II Schedule III |
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Describe Schedule I banks |
-Owned by Canadian shareholders
-Traded on major Canadian Stock Exchanges -Can accept deposits and offer investment and financial services |
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Describe Schedule II banks |
-Mostly foreign owned
-Have the same power as Schedule I banks, but are limited in the number of branches and assets held -Usually focus on investments and corporate banking |
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Describe Schedule III banks |
-Foreign banks
-Concentrate on banking and corporate customers |
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What is a Trust Company? |
-First established in the late 1800's to manage and invest the funds entrusted to them by consumers -Sometimes referred to as "near banks" as their services are very similar to banks -Trust companies also assist customers with the sale of real estate, administer estates, and maintain accounts of charitable organizations |
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What is a Credit Union? |
-A member-owned financial institution, either provincially or federally chartered
-Often more competitive than banks and trust companies because its nonprofit status makes its operating costs lower -A form of co-operative ownership -Members pool their money together and share in the success of the business -Credit Unions perform many of the same functions as a bank and also help consumers with investments such as RRSP's and other types of investments |
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What are the security features on the polymer series of bank notes? |
-Metallic portrait
-Large window -Transparent text -Small numbers -Maple leaf border -Metallic building -Raised ink -Hidden numbers -Frosted maple leaf window |
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What is the theme of the polymer series? |
Innovation and inventions
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What kind of identification is necessary for opening a bank account in Canada? |
Two pieces of identification: -Driver's license -Passport -Citizenship certificate -Birth certificate -SIN card -Health card |
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What is a paystub? |
-A pay stub, pay stub pay advice, or sometimes paychek stub -A document an employee receives either as a notice that the direct deposit transaction has gone through, or is attached to the paycheck |
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What different elements must be present on a payslip? |
-Income tax
-Employee contributions to Employment Insurance (EI) -Employee contributions to the Canada Pension Plan (CPP) |
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What is Income Tax? |
-A tax on income at graduated rates, which means that the tax rate goes up as your income goes up
-You must also pay provincial tax, which varies by province |
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What are the FEDERAL graduated income tax rates? |
15% - $1 to $45,282
20.5% - $45,283 to $90,563 26% - $90,564 to $140,388 29% - $140,389 to $200,000 33% - Over $200,000 |
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What are the SK PROVINCIAL graduated income tax rates? |
11% - $1 to $44,601
13% - $44,602 to $127,430 15% - Over $127,430 |
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What is the basic personal amount both federally and provincially? |
-Basic personal amount - when you do not pay an income tax before a set amount
-Federal - $11,474 -Provincial - $15,843 |
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What is EI? How much does an individual contribute from each cheque? Employer? |
-Employment insurance - a social program that contributes to the security of all Canadians by providing assistance to workers who lose their jobs and helping unemployed people across the country get back to work -Employees pay $1.88 per $100 (1.88%) -Employers pay 1.4 times what their employees paid to EI |
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What is CPP? How much does an individual contribute from each cheque? Employer? |
-Canada Pension Plan - a contributory, earnings-related social insurance program for all employees who are 18 years of age and over -Both employees and employers contribute 4.95% from each check |
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What are the maximum amounts an individual contributes per year to EI and CPP? |
Employment Insurance: -Max $955.04 Canada Pension Plan: -Max $2,564.10 |
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What are some other deductions that could appear on your pay slip? |
-Pension plan -Group insurance plan -RRSP savings plan -RESP savings plan |
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What is the difference between net pay and gross pay? |
Gross pay - The amount you make every week, every month, or every hour before your employer deducts any income taxes, payroll taxes (EI and CPP), or other items Net pay - Your gross pay after all amounts are deducted and remitted to CRA on your behalf by your employer |
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What is tax? When was tax first collected? |
-A mandatory payment made to government
-It can be levied upon things such as income, property, and sales -The income generated from taxes is used to support the government and the programs and services it provides -Since the beginning of recorded history, some kind of tax system has existed in organized societies and governments |
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What are 3 types of taxes? (how are they applied to salary?) |
-Proportional tax - same % of tax on everyone, regardless of income -Progressive tax - higher tax on people with higher incomes -Regressive tax - higher tax on people with lower incomes |
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Who benefits from Canada's tax system? |
All Canadians
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Why do we pay taxes? |
-The government collects taxes to pay for things like roads and highways, hospitals, education, health care, national defence, police and fire services, parks and playgrounds, libraries, garbage collection, and many other programs and services
-Tax revenue also helps redistribute wealth to benefit lower-income families, students, seniors, and people with disabilities, by funding social programs such as the old age security pension, Canada child tax benefit, universal child care benefit, and working income tax benefit |
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What is the tax payer bill of rights? |
-A set of 16 rights that you have in your relationship with the CRA
-These rights confirm the CRA's commitment to serve you with professionalism, courtesy, and fairness |
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What is a SIN? |
-A nine-digit number you need to work in Canada or have access to government programs and benefits -You have to give your SIN to anyone who prepares a tax information slip for you, such as your employer or financial institution -However, your SIN is confidential and you should not give it out unless required |
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What is a Form TD1 |
-Personal Tax Credits Return
-Must be completed by anyone who starts a new job -Your employer will provide you with the form to complete -They will use the information from your completed form to determine how much tax they must deduct from your pay |
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What is a Form T1 General? What is a Schedule 1 Form? |
Form T1 General - Income Tax and Benefit Return
Schedule 1 Form - Federal Tax |
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What is a T4? |
-A summary of your earnings and deductions for the year
-You need this information to complete your tax return -Your employer has to give you your T4 slip by the end of February following the calendar year to which it applies |
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What is GST? What is the GST/HST Tax Credit? |
-Goods and services tax
-A tax-free quarterly payment that helps individuals and families with low and modest incomes offset all or part of the GST or HST that they pay |
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Who assesses taxes in Canada? |
Yourself
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What is money? |
Legal tender that represents value; little slips of paper can be exchanged for goods and services, because the person we are giving it to knows they can use that slip of paper somewhere else |
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What are the characteristics that make something useful as money? |
-Durable -Not easily reproduced -Relatively scarce, but not too scarce -Easy to transport and carry around -Divisible into fractions |
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What role does money serve for us? |
-Medium of exchange - We can use it to buy things
-Unit of account - We set prices in terms of money -Store of value - We can save it and use it in the future |
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What are the different ways people can access and use their money today? |
-Financial institutions, specifically using cash, cheques, debit cards, and online transfers -We can store money in these financial institutions by using chequing accounts, savings accounts, savings-chequing accounts, tax-free savings accounts, etc. |
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Why does the Bank of Canada try to keep prices stable in the economy? |
-To help protect the purchasing power of Canada's money
-Also, so we have the "right" amount of money in the economy so products and services can be bought and exchanged, so growth can be encouraged, and so we don't have too much money in the economy that inflation becomes a problem |
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What happens if a nation just prints more money? |
Prices will inflate |
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Why does bartering pose challenges for a modern economy? |
So many goods and services are being produced, so figuring out prices would be a disaster
(ex: is a computer worth 500 towels, 3 bicycles, etc.) |
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Define intrinsic value |
When money has value in and of itself
(ex: money made from gold or silver) |
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Define 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 |
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Define legal tender |
The official money in a country that is widely accepted
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Define exchange rate |
The value of one country's currency in terms of the currency of another country
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Define foreign exchange market |
Locations where the currency of one country can be exchanged for the currency of another country
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Define bartering |
When one item is exchanged directly for another without using money
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Define medium of exchange |
One of the roles of money where money makes it easier to acquire the goods and services we need and want
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Define 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
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Define store of value |
One of the roles of money whereby it is possible to save money rather than spend it and try to increase its value in the future
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Define purchasing power |
-The ability of money to acquire goods and services
-As prices rise, the purchasing power of money falls |
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Define inflation |
A rise in the average price level of goods and services in the economy
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Define 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
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What is a budget? |
-A plan for how you use your money on a month-to-month basis -Helps you look at your expenses, cover them, and save |
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What are the two main steps to making a budget? |
-Work out your monthly income -List your monthly expenses |
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Why is it important to track your expenses? |
So you will know where your money is going and find out if you are really in control of it |
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What should your budget be based on? |
Your income and expenses |
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What are 5 budgeting tips? |
-Keep your budget flexible
-Keep your budget simple -Be honest and realistic -Keep accurate and clear records -Test your budget |
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What is savings and why is it important? |
-A portion of income not spent on current expenditures -Without savings, unexpected events can become large financial burdens |
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How much money should you save? |
At least 6 months worth of expenses
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Where can money be saved? |
-A depository institution
-It is protected from loss, and allows you to make interest from your money |
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What is an Emergency Fund? How big should it be? |
-Savings required to cover unexpected events like a car breakdown, surprise visit to the emergency room, or a lost job -It should be at least as big as 3 months' worth of "operating expenses" (money spent on necessities) |
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What are long-term savings? |
-Deposits and other funds that take time (sometimes years) to mature -Shouldn't be easy for you to access; don't dip into long-term savings for short-term purchases -(ex: retirement fund, cars, housing, long vacations, etc.) |
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What are the 7 key steps to remember when saving money? |
-Do you want it or need it?
-Make savings an automatic habit -Pay yourself first -Put extra income into savings immediately -Pay bills on time -Avoid cheque-cashing stores (ex: MoneyMart) -Save for retirement |
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What are 4 ways to save money? |
-Payroll deductions
-Extra change in jar -Jar change into savings account -Save wage increases |
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Define investing |
The act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit |
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What is one major advantage of Mutual Funds? |
They "pass through" dividends to their shareholders; if a stock owned by the mutual fund pays a dividend, it is paid directly to the mutual fund shareholders |
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What does a Stock represent? |
A percentage of ownership of a company including assets and profits |
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What is preferred stock? |
Stock that gets paid dividends first |
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What is an IPO? |
-Initial Public Offering
-When a company first sells shares of stock to the public |
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Where were stocks first created? |
Rome |
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What is a Mutual Fund? |
A way you can buy into a wide range of stocks, bonds, money markets, or other securities all at once |
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What is a disadvantage of Mutual Funds? |
-Fees
-No option to customize the holdings of a mutual fund; you are stuck with what the fund manager chooses |
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What is the most common winning investment strategies for new beginners? |
Buy what you know |
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What does it mean to "Diversify" your portfolio? |
-Hold more than 1 stock
-Don't have all stocks in the same area of the economy -Have a mix between stocks, mutual funds, or other securities |
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How many companies are in the Dow-Jones Industrial Average? |
30
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What makes up a "Ticker Symbol" in the United States? |
1 to 5 letters |
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"Money in your bank account and investments that are like cash" describes what type of investment strategy? |
Cash and cash equivalents |
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"Each fund focuses on specific investments, like government bonds, stocks, from large companies, stocks from certain countries, or a mix of stocks and bonds" describes what type of investment strategy? |
Investment funds |
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"When you buy stocks" describes what type of investment strategy? |
Equities
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What is credit? |
The privilege of using someone else's money to purchase an item or service now then pay for it later |
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What is a creditor? |
The person or business that sells on credit or grants a loan
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What is a debtor? |
The person or business that buys on credit or obtains a loan
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What the advantages to using credit? |
-Able to buy needed items now -Don't have to carry cash -Creates a record or purchases -More convenient than writing cheques -Consolidates bills into one payment -Emergencies |
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What are the disadvantages to using credit? |
-Interest
-May require additional fees -Financial difficulties may arise if one loses track of how much as been spent each month -Increased impulse buying may occur |
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Fully describe the 3 C's of credit |
Character - Will you repay the debt? Borrower's willingness, reliability, and trustworthiness to make a loan repayment Capital - What if you don't repay the debt? The value of the borrower's assets that could be used to repay debts Capacity - Can you repay the debt? Does your income support your credit use |
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Describe Single Payment Credit |
-Items and services are paid for in a single payment, within a given time period, after the purchase -Interest is usually not charged (ex: utility companies, some retail businesses) |
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Describe Instalment Credit |
-Merchandise and services are paid for in two or more regularly scheduled payments of a set amount -Interest is included -A repayment plan is drawn up in the form of a conditional sales contract based upon fulfilling a number of conditions of the contract (ex: some retail businesses, such as car and appliance dealers) |
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Describe Consumer Loan |
Money may also be loaned out for a special purpose, with the consumer agreeing to repay the debt in regularly scheduled payments (ex: chartered banks, consumer finance companies, credit unions, trust companies) |
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Describe Revolving Credit |
-Many items can be bought using this plan as long as the total amount does not go over the credit user's assigned dollar limit -Repayment is made at regular time intervals for any amount at or above the minimum required amount -Interest is charged on the remaining balance (ex: retail stores, financial institutions that issue credit cards) |
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What is a credit score? |
A number used by financial institutions and credit card companies to determine risk level when issuing you a loan or credit card
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What model is used to calculate credit scores? |
The FICO model |
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Who are the two major credit bureaus in Canada? |
-Equifax -TransUnion |
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Describe a <550 credit score |
-LOW -You could be denied a loan or credit card |
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Describe a 550-720 credit score |
-MIDDLE -You may not get turned down for a loan, but you will likely be charged a higher interest rate |
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Describe a 720+ credit score |
-PRIME
-You're in good shape; this is where you want your credit score to be |
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Why do credit scores matter? |
As well as loans, they can affect renting an apartment, student loans, car payments, and job applications
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How is a credit score calculated? |
-10% mix of credit
-10% new credit -15% length of credit -30% capacity -35% payment history |
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How does payment history relate to your credit score? |
Making payments on time boosts your credit score
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How does capacity relate to your credit score? |
The less you use of your total available credit each month, the better
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How does new credit relate to your credit score? |
Opening new credit cards (even retail credit cards) has a short-term negative effect on your score
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How does length of credit relate to your credit score? |
A longer history of good credit habits raises your score
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How does a mix of credit relate to your credit score? |
A mix of revolving credit (credit cards) and instalment loans (mortgages, car loans) boosts your score
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What is a credit report? |
A detailed report of an individual's credit history
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Define annual fee |
-Yearly fee charged by a credit card company for using a credit card
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Define APR |
-Annual percentage rate
-Interest rate charged on credit card balances -Rate is applied every month an outstanding balance is present |
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Define balance transfer |
-When the outstanding balance of one of more credit cards is moved to another credit card account
-Usually done by consumers who want a lower interest rate |
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Define cash advance |
A cash loan from a credit card using an ATM, bank withdrawal, or convenience cheques
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Define credit line |
The amount of money that can be charged to a credit card account
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Define finance charges |
Amounts billed when one does not pay their monthly credit card balance in full
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Define fixed rate |
APR that does not change throughout the year, unlike introductory APRs, which change after a specific period of time
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Define introductory period |
-The length of time during which the introductory APR is in effect -APR will rise after this |
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Define introductory rate |
-AKA the teaser rate -A low rate offered by a credit card company as an incentive to apply for the card -APR will rise after introductory period is over |
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Define late fee |
Amount charged to a borrower who misses paying at least their minimum payment by the payment deadline
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Define rewards program |
-A credit card that carries an incentive or reward for use -Usually involving cash back, merchandise points, or frequent flier points |
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Who are the big 3 credit card companies? |
-MasterCard -Visa -American Express |
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What are 6 tips for using credit? |
-Pay off your balance every month
-Use the card for needs, not wants -Never skip a payment -Use a rewards card -Stay under 30% of your total credit limit -Protect yourself from credit card fraud |
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How can you protect yourself from credit card fraud? |
-Replace credit cards after a data breach -Guard your information (don't just give it away) -Change passwords frequently and use strong passwords -Frequently check your bank/credit statements online -Use a secure pay device, like an EMV card or secure digital pay service (ex: Apple Pay, Google Wallet) whenever possible -Report fraud and financial crime immediately |
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How is interest calculated on a credit card? |
-Purchases - calculated on the average daily amount -Cash advances - interest applies the day you withdraw cash -Balance transfers - high interest rate |
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What is the order that items are paid off on a credit card? |
Interest is always paid first |
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What is the formula for calculating interest on a credit card? |
average daily balance X daily interest rate X number of days = interest charged |
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What is a debt load? |
-A consumer's amount of debt
-The sum total of all the money you owe (ex: mortgage, student loans, credit cards, loans from friends and family) |
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What is debt/income ratio? |
When your income is compared with your debts to analyze whether you have an appropriate amount of debt |
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How much is too much debt? |
-You'll know -When you're feeling a financial squeeze every month because of credit card bills -You're out of your debt comfort zone |
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What is the 28/36 rule? |
Your monthly household debt service does not exceed 28% of your gross monthly income -Your total debt service, including house payments and other financial obligations, should not exceed 36% of your gross monthly income |
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What are 5 warning signs you have too much debt? |
-Next month's bills arrive before you've paid last month's bills -You don't know how much you owe -You get a new loan to pay old loans -You only pay the minimum balance due each month -You spend more than 20% of your net income on debt maintenance |
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What is bankruptcy? How does it work? Who will know you filed? |
-A legal process performed under the Bankruptcy and Insolvency Act to help a person cope with a financial crisis -Your property is given to a trustee in bankruptcy who sells it and distributes the money among your creditors -Anyone who reads the "legal notices" section in the newspaper (it will be on there). However, if there are minimal assets, the creditors are notified by email |
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What are the pros and cons of bankruptcy? |
PROS: -The discharged bankrupt is relieved of most debts, and unsecured creditors cannot take legal steps to recover their debt. Basically allows for a "fresh start" -Bankruptcy generally does not affect employment -The bankrupt can avoid being harassed by creditors CONS: -Some debts are not released with a bankruptcy declaration (spousal/child support, fraud debt, court fines, student loans (kinda)) -The bankrupt may have difficulty in being bonded -It will negatively affect your credit rating, and will appear on your rating for 6 or 7 years |
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What is a consumer proposal? What are the advantages compared to bankruptcy? |
-A legal procedure that stops creditors from taking legal action against a debtor ADVANTAGES: -The potential financial loss to creditors is limited -The debtor may be able to hold on to some assets -Unsecured creditors will not be able to take legal steps to recover their debts from the debtor (such as seizing property) unless the proposal is rejected or annulled -When the proposal is fully performed and the debtor has attended through two counselling sessions with a qualified counsellor, the debtor receives a certificate of full performance -Credit rating is rated less severely than with a bankruptcy |
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What are some sources to pay for your education? |
-Your own savings -RESP - Registered Education Saving Plan -Government Student Loans -Student Line of Credit -Grants, bursaries, and scholarships |
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What is an RESP? |
Registered Education Savings Plan
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What is the CESG? |
Canada Education Savings Grant |
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How much will the CESG pay you when you save using an RESP? |
-20% of annual contributions up to $2500 per child -Max lifetime grant limit is $7200 |
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How do student loans work in Canada? |
-Shared by federal and provincial governments -Offered to full and part time post-secondary students |
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Who is eligible for student loans? |
-Saskatchewan resident -Canadian citizen -Financial need according to program criteria -Enrolled or qualified to enroll as a full-time post-secondary student -You will be taking at least 60% of a full course load, or 40% if you have a permanent disability -Previous loans are in good standing -Pass a credit check if over 22 y/o and applying for the first time -Not exhausted the lifetime maximum assistance limit |
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What are the interest rates on Government student loans? |
-Canada Student Loans = Prime + 5%
-Saskatchewan Student Loans = Prime + 2.5% |
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What is a Student Line of Credit |
Personal loan offered by financial students, but with a maximum loan balance |
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What are 3 things you need to see on a rental lease? |
-Monthly rental price -Payment due date -Length of the lease and consequences if one side breaks the agreement |
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Who is responsible for knowing everything on their lease agreement? |
Both the landlord and the tenant |
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What is a landlord? What is a tenant? |
-Landlord - person who owns the property
-Tenant - person renting the property |
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What is tenant insurance? |
-Covers any damage to your part of the building and to others who live there
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What is a co-signer? |
Someone who will share financial responsibility for the lease if you are unable to make payments |
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What does it mean to break a lease? What do you need to consider when breaking a lease? |
-Not honouring the outlined terms -The financial ramifications and consequences for breaking a lease |
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What are the pros and cons of having a roommate? |
PROS: -Lower price for more space -Cheaper utilities -Split groceries CONS: -Getting annoyed with your roommate |
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How much is required for a down payment to avoid High Ratio mortgage insurance? |
25% or more of the property value |
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Who are the two main providers of Mortgage Insurance in Canada? |
-Canada Mortgage and Housing Corporation (CMHC) -GE Mortgage Insurance |
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What does it mean to get pre-qualified? |
Your mortgage was pre-approved |
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What is the process of getting pre-qualified? |
You get pre-qualified for a mortgage, then you shop for houses |
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What does a mortgage consist of? |
-Down payment -Monthly payments -Fees |
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What is a fixed rate? |
-A mortgage that requires a monthly payment that is the same amount throughout the term of the loan -Best if interest rates are low when you get the mortgage |
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What is a variable rate? |
-A mortgage with the monthly payment fluctuating |
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What is a condominium? |
-Halfway between an apartment and house -You own the building and the property, but you pay maintenance fees every month (grass-cutting, hedge-trimming, shutter-painting, etc.) -You're responsible for interior repairs and maintenance |
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What are some things to consider in deciding the right home for yourself? |
-How long are you willing to commute?
-Do you have children? -Do you like high-energy environments or peace and quiet? -Consider what aspects of a community are important to you |
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What is a real estate agent? |
Someone who is obligated to do whatever they can to get the best deal for their clients |
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How does a real estate agent's role change from seller to buyer? |
-Seller - They get the best deal for their clients (you're not their client) -Buyer - They get the best deal on a house for you |
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How are agents paid? |
-Commission, usually 5% -Usually split between the seller's agent and buyer's agent |
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Describe closing a home deal |
CONTRACT: -House found, offer made, offer accepted, seller's agent draws up a contract specifying the terms and a closing date -When you sign this, you officially agreed to purchase the home |
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What is a home inspection? |
When a home inspector goes through an entire house to make sure there are no problems that will either affect its value or cause major problems in the future |
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What does having a real estate lawyer do for you? |
-They will handle the process of closing on a home
-They will get certain documents for you, like title search, title insurance, survey, and homeowner's insurance |
