unit 1 Flashcards
(40 cards)
What is Legal Tender?
Bills and Coins (has to be accepted by merchants)(NOT a credit card or cheque)
What is Purchasing Power?
The value of a currency expressed in terms of the
amount of goods or services that one unit of money can
buy
NOTE: Purchasing power changes as prices for goods
and services change
What is CPI?
A measure that examines the weighted
average of prices of a basket of consumer
goods/services.
- 600 products typically bought by Canadian
households
- Includes food, shelter, transportation,
clothing & recreation
What are the different types of income?
-Gross Income (Total received from job/income source)
-Disposable Income (total after taxes, insurance etc.)
-Discretionary Income (How much is left over)
How do you manage money efficiently?
-Know how much you have to spend and where to spend it
-Always put aside money for needs, and use the rest for wants
How do you spend money wisely?
-Comparison Shopping
-Sales
-Avoiding impulse buying
What are the basics of budgeting?
-set personal budget goals
-prepare a personal budget
-calculate fixed expenses (regular payments that stay the same such as mortgage payments and rent)
-calculate variable expenses (clothing, eating out, power bill)
What is revenue?
The amount of money an individual receives from work. (ex. sales of goods and services, job)
What are expenses?
Money going out in payment of living
expenses (rent, utilities, insurance)
What is a CPP?
CPP stands for Canada Pension Plan, which is one of three levels of Canada’s retirement income system, which is responsible for paying retirement or disability benefits.
What is EI?
EI stands for Unemployment Insurance. Its a small source of income for workers who have lost their jobs through no fault of their own. (Not eligible if the worker quits their job.)
What is Life Insurance?
Individuals pay an insurance company a
monthly fee. A sum of money is paid out by the
Insurance company upon the death of the
individual
What is Long Term Disability?
Individuals pay an insurance company a
monthly fee. A sum of money is paid out to the
individual upon an injury that leaves them
unable to work for an extended period of time.
What is the Bank Act?
-Sets the rules and regulations banks need to follow
-Set by federal government
-Outlines procedures for opening banks, forming mergers and what banks can and cannot do.
-There are 3 types of banks: Schedule 1, Schedule 2, and Schedule 3 banks
-These are referred to as chartered banks
What is the prime rate?
Prime rate: The annual interest rate that Canada’s major banks and financial institutions use to set interest rates for variable loans & lines of credit. Currently 3.5%
What are interest rates used for?
-They are used for controlling the money supply by the Bank of Canada
-If they are higher, less loans will be taken out, causing the supply to drop
-If they are lower, more loans will be taken out, causing the supply to increase.
What’s a trust company?
-A corporation that takes care of the administration of trusts and estates as a trustee
-Usually owned by large banks but some are privately owned.
What do trust companies provide?
Provides:
-basic banking services
-purchase/sale of real estate,
-administer estates of deceased people
-maintain trust accounts for charities and minors
-E.g. Canadian Western Trust
What’s a credit union?
Organized and owned by groups of people who agree to pool and share their resources. Must own 1 share to be apart of it. Share a common bond of association:
-Profession
-Cultural/ethnic background
-Geographic region
-Religion
What do credit unions do?
-Offerings innovative loan repayment options during economic difficulty
-Each member has one vote when decisions are being made
-Credit unions are accountable to their members
-Can respond in unique ways to the special needs of their members
ex. Teacher’s Credit Union
What’s the line of credit?
instant access to credit, one-time approved loan that allows you to borrow up to a prearranged amount
-Pay interest only when money is borrowed
-Very helpful for new businesses
What are some functions of a bank?
They encourage savings, and give you access to financial services and exchanging currencies. They make most of their money off interested on loans to customers. Some examples of financial services are:
-Chequing account
-Savings account
-Loans-paying back over a fixed period of time
-Insurance (Home/Car/Life)
-Line of credit
-Credit cards
-Direct deposit and withdrawals
-Overdraft protection
-Safety deposit boxes
Why should you save?
- safely putting money aside for future use
-earns interest
-protected against lost
-short and long term goals (ex. a new phone or a car)
-emergency needs (car breaks down)
-security and future needs (you loose your job)
What is the simple interest formula?
i = prt
