Financial Terms Explained
Looking for the meaning of terms like TFSA, RRSP, ETF, capital gains, or mortgage amortization?
Our Canadian financial glossary explains common money terms, acronyms, and financial jargon in plain English.
A
ACB (Adjusted Cost Base)
The original cost of an investment, adjusted for purchases, reinvested distributions and other transactions. It is used to calculate capital gains or losses.
Amortization
The total estimated length of time required to repay a mortgage in full.
Annuitant
The person for whom an annuity or registered retirement arrangement is established and whose age or life may be used to determine payments. For an RRSP or RRIF, the annuitant is generally the account owner.
Annuity
A financial product that provides regular income payments, often during retirement.
APR (Annual Percentage Rate)
The annual cost of borrowing, including the interest rate and certain fees.
Average Tax Rate
The total amount of income tax paid divided by taxable income, expressed as a percentage.
B
Beneficiary
The person or organization named to receive money or property from an insurance policy, registered account, trust or estate.
Bond
An investment representing a loan made to a government or company in exchange for interest payments.
Budget
A plan showing how much money you expect to earn, spend and save.
C
CAGR (Compound Annual Growth Rate)
The average annual rate at which an investment or other value grew over a specified period, assuming growth was compounded at a steady rate. It does not show year-to-year fluctuations.
Capital Dividend Account (CDA)
A notional tax account used by a Canadian private corporation to track certain tax-free amounts that may be paid to shareholders as tax-free capital dividends, subject to tax rules.
Capital Gain
The profit earned when an investment or property is sold for more than its adjusted cost base.
Cash Surrender Value
The amount a policy owner may receive when permanently cancelling or surrendering a permanent life insurance policy, after applicable fees, withdrawals and outstanding policy loans.
CCB (Canada Child Benefit)
A tax-free monthly payment available to eligible families to help with the cost of raising children.
CDIC (Canada Deposit Insurance Corporation)
A federal Crown corporation that protects eligible deposits held at member financial institutions, subject to coverage rules and limits.
CESG (Canada Education Savings Grant)
A federal grant that adds money to an eligible child’s RESP.
CIPF (Canadian Investor Protection Fund)
An organization that may protect eligible client property if a member investment dealer becomes insolvent.
CIRO (Canadian Investment Regulatory Organization)
The national self-regulatory organization overseeing investment dealers, mutual fund dealers and trading activity in Canada.
CPP (Canada Pension Plan)
A government retirement benefit based mainly on a person’s CPP contributions and employment earnings.
CRA (Canada Revenue Agency)
The federal agency responsible for administering taxes, benefits and many registered savings programs.
Credit Score
A number used by lenders to help assess how reliably someone manages borrowed money.
D
Deemed Disposition
A tax rule that treats property as though it was sold at fair market value even when no actual sale occurred, such as upon death or certain transfers.
Dividend
A payment or distribution made by a corporation to its shareholders, usually from the corporation’s earnings or accumulated profits.
DTC (Disability Tax Credit)
A non-refundable tax credit intended to help eligible individuals with severe and prolonged impairments, or supporting family members, reduce income tax.
E
ETF (Exchange-Traded Fund)
An investment fund that holds a collection of assets and trades on a stock exchange.
Ex-Dividend Date
The date on or after which a person purchasing a stock will not receive the company’s next scheduled dividend.
Executor
The person named in a will to manage and distribute a deceased person’s estate. In Ontario, this person is also commonly called an estate trustee.
F
FCAC (Financial Consumer Agency of Canada)
The federal agency responsible for protecting the rights and interests of financial consumers.
FHSA (First Home Savings Account)
A registered account that helps eligible first-time home buyers save for a qualifying home. Contributions may be tax-deductible, and qualifying withdrawals can be tax-free.
Fixed Mortgage Rate
A mortgage interest rate that generally remains unchanged during the mortgage term.
G
GDS (Gross Debt Service Ratio)
The percentage of gross household income required to cover housing expenses.
GIC (Guaranteed Investment Certificate)
An investment that generally guarantees the original deposit and pays interest over a specified period.
GIS (Guaranteed Income Supplement)
A monthly income-tested benefit available to eligible lower-income recipients of Old Age Security.
GST (Goods and Services Tax)
A federal sales tax applied to many goods and services in Canada.
H
HBP (Home Buyers’ Plan)
A program that allows eligible individuals to withdraw money from their RRSP to purchase or build a qualifying home, subject to repayment requirements.
HELOC (Home Equity Line of Credit)
A revolving line of credit secured against the equity in a home.
Henson Trust
A fully discretionary trust in which the trustee controls when and how much money is paid to a beneficiary. It is often used to support a person with a disability while helping preserve eligibility for means-tested government benefits, depending on provincial and program rules.
Holding Company (Holdco)
A corporation primarily used to own assets, investments or shares of other companies. A holding company may own the shares of an operating company.
I
Immediate Financing Arrangement (IFA)
A financial strategy that uses a permanent life insurance policy as collateral for a loan, allowing the policy owner to access or reinvest borrowed funds while maintaining the insurance coverage. It involves lending, insurance and tax risks.
Inflation
The general increase in prices over time, which reduces the purchasing power of money.
Insured Retirement Plan (IRP)
A financial strategy that uses the cash value of a permanent life insurance policy and borrowing to help supplement retirement income while maintaining a life insurance death benefit.
Interest
The amount earned for saving or investing money, or the amount charged for borrowing it.
IPO (Initial Public Offering)
The first time a private company offers its shares for sale to the public.
J
Joint Account
A financial account owned and operated by two or more people.
K
KYC (Know Your Client)
Information a financial professional must collect to understand a client’s identity, financial circumstances, objectives, time horizon and risk profile.
L
LIF (Life Income Fund)
A registered retirement-income account used to withdraw money from locked-in pension savings, subject to withdrawal limits.
LIRA (Locked-In Retirement Account)
A registered account that holds transferred pension funds until they can be used for retirement income.
LLP (Lifelong Learning Plan)
A program that allows eligible individuals to withdraw money from an RRSP to finance education or training, subject to repayment requirements.
LOC (Line of Credit)
A flexible borrowing arrangement that allows money to be borrowed up to an approved limit.
LTV (Loan-to-Value Ratio)
The amount of a mortgage or loan compared with the value of the property securing it.
M
Marginal Tax Rate
The tax rate applied to the next dollar of taxable income earned.
MER (Management Expense Ratio)
The annual cost of managing and operating an investment fund, expressed as a percentage of the fund’s assets.
Mortgage Term
The period during which a mortgage agreement, interest rate and conditions remain in effect.
N
NAV (Net Asset Value)
The value of an investment fund’s assets minus its liabilities, usually calculated on a per-unit basis.
Net Worth
The total value of what a person owns minus the total amount they owe.
NOA (Notice of Assessment)
A document from the CRA summarizing the results of an income-tax return after it has been processed.
Non-Registered Account
An investment account that is not registered under the Income Tax Act. It does not have registered-account contribution or withdrawal limits, but investment income and capital gains may be taxable.
O
OAS (Old Age Security)
A government pension available to eligible older Canadians based mainly on age and Canadian residency history.
Operating Company (Opco)
A corporation that carries out the active day-to-day operations of a business, such as selling products, providing services and employing staff.
OSC (Ontario Securities Commission)
The regulatory body responsible for overseeing Ontario’s capital markets.
OSFI (Office of the Superintendent of Financial Institutions)
The federal regulator responsible for supervising federally regulated banks, insurance companies and pension plans.
P
Power of Attorney (POA)
A legal document that gives another person the authority to make financial, property or personal-care decisions on someone’s behalf. The powers provided depend on the document and applicable provincial laws.
Prime Rate
The base lending rate a financial institution uses to help set interest rates for products such as variable-rate mortgages and lines of credit. Each financial institution sets its own prime rate.
Principal
The original amount borrowed through a loan or mortgage, excluding interest.
Probate
The legal process of confirming the authority of an estate’s executor and validating a will when required.
R
RDSP (Registered Disability Savings Plan)
A registered account designed to help support the long-term financial security of an eligible person with a disability.
REIT (Real Estate Investment Trust)
An investment that owns or finances income-producing real estate.
RESP (Registered Education Savings Plan)
A registered account designed to help save for a beneficiary’s post-secondary education.
RRIF (Registered Retirement Income Fund)
A registered account that provides retirement income using savings transferred from an RRSP or another eligible account.
RRSP (Registered Retirement Savings Plan)
A registered account designed to help Canadians save for retirement. Eligible contributions may reduce taxable income.
S
Securities
Financial assets such as stocks, bonds, mutual funds and ETFs.
Self-Directed Account
An investment account in which the account holder chooses and manages their own investments.
Spread
The difference between two financial values, such as the buying and selling price of an investment.
Successor
A person designated to take over ownership or control of certain registered accounts or contracts after the original holder dies. Eligibility and treatment depend on the account type and applicable provincial rules.
T
T3 (Statement of Trust Income)
A tax slip reporting certain income received from trusts, mutual funds or ETFs.
T4 (Statement of Employment Income)
A tax slip showing employment income and payroll deductions for the year.
T5 (Statement of Investment Income)
A tax slip reporting certain investment income, such as interest and dividends.
TDS (Total Debt Service Ratio)
The percentage of gross household income required to cover housing expenses and other debt payments.
TFSA (Tax-Free Savings Account)
A registered account in which eligible investment income and withdrawals are generally tax-free.
TSX (Toronto Stock Exchange)
Canada’s largest stock exchange.
TSXV (TSX Venture Exchange)
A Canadian stock exchange focused primarily on smaller and emerging companies.
U
Underwriting
The process used by a lender or insurer to assess risk and determine whether an application will be approved.
V
Variable Mortgage Rate
A mortgage interest rate that may change during the term based on movements in the lender’s prime rate.
Volatility
The degree to which the price or value of an investment rises and falls over time.
W
Withholding Tax
Tax deducted from a payment before the recipient receives it, such as tax withheld from employment income or an RRSP withdrawal.
Y
Yield
The income generated by an investment, usually expressed as a percentage of its value or purchase price.
Z
Zero-Coupon Bond
A bond that does not make regular interest payments but is generally purchased below its maturity value.