Financial Glossary

The planned time to repay a mortgage in full. The maximum depends on the mortgage and borrower: eligible first-time buyers and eligible buyers of newly built homes may qualify for a 30-year insured amortization; other insured mortgages are generally limited to 25 years. Uninsured limits depend on lender rules.

The total yearly cost of borrowing, including interest and fees, expressed as a percentage. A credit card might advertise 19.99% interest but have a higher APR once annual fees are included.

How you divide your investment portfolio among different asset types like stocks, bonds, and cash. Your allocation should match your risk tolerance and time horizon.

A legal process for people who can't repay their debts. In Canada, a Licensed Insolvency Trustee handles the process. It provides a fresh start but seriously impacts your credit for 6-7 years.

The amount of income every Canadian can earn tax-free each year. For 2026, the federal basic personal amount is $16,452. Each province has its own amount as well.

The person or entity named to receive benefits or assets under an account, insurance policy, or other arrangement. The effect of a designation and whether proceeds pass outside an estate depend on the product, province or territory, and applicable law; review designations after major life changes.

A payment method that lets you split a purchase into several smaller payments (typically 4 over 6-8 weeks). Services like Afterpay, Klarna, and PayBright offer BNPL in Canada. Often interest-free for short terms but can carry high fees for missed payments.

The profit you make when you sell an investment for more than you paid. In Canada, a portion of capital gains (the inclusion rate) is added to your taxable income.

The percentage of a capital gain added to taxable income. For individuals, the general inclusion rate is 50% in 2026. The previously proposed higher rate was cancelled.

The ability to save unused contribution room or deductions for use in a future year. For example, unused RRSP room and TFSA room carry forward indefinitely.

The money coming in (income) minus the money going out (expenses) over a period. Positive cash flow means you have money left over to save or invest.

The Canadian tax term for depreciation — the annual tax deduction you can claim on the declining value of capital property like rental buildings, equipment, or vehicles used for business. Claiming CCA on a rental property reduces your taxes now but increases capital gains when you sell.

A tax-free monthly payment to eligible families to help with the cost of raising children under 18. For July 2026 to June 2027, the maximum is $8,157/year per child under 6 and $6,883/year per child aged 6–17. It starts to phase out when adjusted family net income exceeds $38,237.

A federal agency that insures your eligible deposits (up to $100,000 per category) at member banks if the bank fails. Covers chequing, savings, GICs, and more.

An everyday bank account for paying bills, making purchases, and receiving your paycheque. Usually has unlimited transactions but earns little or no interest.

Costs beyond the purchase price when buying a home, such as land transfer tax, legal work, inspections, appraisal, title insurance, tax adjustments, and GST/HST on some new homes. The total varies by location, property, lender, and transaction; get local estimates.

Mortgage default insurance from CMHC, Sagen, or Canada Guaranty is generally required when a qualifying home purchase has less than 20% down. It protects the lender, not the borrower. Eligibility and premiums depend on the property, loan, down payment, amortization, and insurer; homes priced at $1.5 million or more are not eligible for this insurance.

A fixed amount you pay each time you use a health service (e.g., $10 per prescription). Your insurance covers the rest. Common in employer health and dental plans.

Auto insurance that pays to repair or replace your car if you're in an accident, regardless of who's at fault. Optional, but usually required if you have a car loan or lease.

Interest earned on both your original money and on the interest it has already earned. Over time, compounding creates a snowball effect that accelerates your investment growth.

Auto insurance that covers damage to your car from non-collision events like theft, hail, fire, vandalism, or hitting an animal. It's optional but often worth having.

A single loan used to pay off multiple debts, combining them into one monthly payment at (ideally) a lower interest rate. It simplifies repayment but doesn't reduce what you owe.

A legally binding agreement negotiated through a Licensed Insolvency Trustee where you repay a portion of your debt over up to 5 years. It's a Canadian alternative to bankruptcy.

A mandatory government pension program funded by contributions from your paycheque (5.95% of earnings between $3,500 and $74,600 in 2026, plus CPP2 on earnings up to $85,000). Provides retirement, disability, and survivor benefits. The maximum new retirement pension at age 65 is $1,507.65/month in 2026; the average new pension at age 65 was $877.01/month from July to September 2026.

The federal government agency that administers tax laws and delivers benefits such as the Canada Child Benefit and Canada Groceries and Essentials Benefit (CGEB, formerly the GST/HST credit).

A company that collects and maintains your credit history. Canada has two: Equifax and TransUnion. Lenders report your activity to them and check your file when you apply for credit.

A number (typically 300-900 in Canada) that represents how reliable you are as a borrower. It's based on your payment history, credit utilization, length of credit history, and more.

A member-owned financial institution that operates similarly to a bank but is not-for-profit. Credit unions often offer lower fees and better rates. Deposits are insured provincially.

The share of your available revolving credit that you are using. Regularly using a large share may affect a credit score, but there is no universal percentage that guarantees a particular score. For example, using $1,500 of a $5,000 limit is 30%.

The amount you pay out of pocket before your insurance starts covering costs. For example, with a $500 deductible on a $2,000 claim, you pay $500 and insurance pays $1,500.

An automatic electronic transfer of money straight into your bank account, commonly used by employers for paycheques and by the CRA for tax refunds or benefit payments.

A payment a company makes to its shareholders from its profits. Canadian dividends receive favourable tax treatment through the dividend tax credit.

Investing a fixed dollar amount at regular intervals (e.g., $200 every payday) regardless of the price. This smooths out market ups and downs and removes the stress of timing the market.

The upfront amount you pay toward a home purchase. For homes priced below $1.5 million, the minimum is generally 5% on the first $500,000 and 10% on the portion above $500,000. Homes priced at $1.5 million or more generally require at least 20% down. Lender and insurer rules may require more.

The overall percentage of your total income that you actually pay in tax, after all brackets are applied. It's always lower than your marginal rate.

A government program providing temporary income to workers who lose their job, are on parental leave, or are too sick to work. Funded by payroll deductions (1.63% of insurable earnings in 2026, max $68,900). Regular benefits provide 55% of average insurable earnings up to a maximum.

Money set aside in an easily accessible account (like a HISA) to cover unexpected expenses or job loss. A common target is 3-6 months of essential living expenses.

A basket of investments (stocks, bonds, etc.) that trades on the stock exchange like a single stock. ETFs typically have low fees and are a popular way to diversify.

A specific situation, condition, or event that your insurance policy will not cover. For example, most travel insurance excludes pre-existing medical conditions.

The federal agency that protects consumers of financial products and services in Canada. The FCAC oversees banks, insurance companies, and payment processors, and provides educational resources about your rights as a financial consumer.

A registered account for first-time home buyers. Contributions are tax-deductible (like an RRSP) and withdrawals for a home purchase are tax-free (like a TFSA). Up to $8,000/year, $40,000 lifetime.

A fixed rate stays the same for the contract term. A variable rate is usually tied to the lender's prime rate, which may change with market conditions and Bank of Canada policy. Whether your payment changes or the interest/principal split shifts depends on the contract.

A low-risk investment where you lock your money in for a set period (e.g., 1-5 years) in exchange for a guaranteed interest rate. Your principal is protected.

A tax-free monthly payment for low-income seniors who receive OAS. The amount depends on your income and marital status. You must apply and file your taxes annually to remain eligible.

A program that lets an eligible participant withdraw up to $60,000 from an RRSP to buy or build a qualifying home for themselves or a specified disabled person. Repayments are generally spread over 15 years. For first withdrawals made from 2022 through 2028, the first repayment year is the fifth year after the withdrawal year; otherwise it is generally the second year. Any required amount not repaid is included in taxable income. The HBP may be combined with a qualifying FHSA withdrawal if each program's rules are met.

A revolving line of credit secured by your home. A HELOC limit may be up to 65% of the home's value, subject to your equity and lender approval. Rates and terms vary, and your home is collateral for the debt.

A savings account that pays a higher interest rate than a regular savings account. Online banks in Canada often offer the best HISA rates.

The portion of your home that you actually own, calculated as your home's market value minus what you still owe on the mortgage. It grows as you pay down your mortgage and as your home appreciates.

A fund that automatically tracks a market index (like the S&P 500 or TSX Composite) instead of trying to beat it. Index funds are passively managed and have very low fees.

The rate at which prices for goods and services rise over time, reducing your purchasing power. The Bank of Canada targets 2% annual inflation.

A Canadian system for sending money directly from your bank account to someone else's using their email or phone number. Most banks include it free with their accounts.

The percentage a lender charges you to borrow money, or the percentage a bank pays you for keeping money in a savings account. It can be fixed or variable.

A provincial tax you pay when you buy property, based on the purchase price. Ontario and most provinces charge it. Toronto adds a municipal land transfer tax on top.

Insurance that pays for damage or injuries you cause to others. It's a mandatory part of auto insurance in every province and a key component of home insurance.

How quickly and easily you can convert an asset to cash without losing value. A savings account is highly liquid; real estate is not.

A registered account that holds pension funds transferred from a former employer's pension plan. The money is "locked in" and generally can't be withdrawn until retirement.

A program that lets you withdraw up to $10,000 per year (maximum $20,000 total) from your RRSP tax-free to fund full-time education or training for you or your spouse. Must be repaid over 10 years.

The tax rate you pay on your next dollar of income. Canada uses a progressive system, so only the income within each bracket is taxed at that bracket's rate.

The annual fee charged by a fund, expressed as a percentage. A 2% MER means you pay $20/year for every $1,000 invested. Lower MERs mean more of your returns stay in your pocket.

The smallest amount you must pay on your credit card or loan each month to stay in good standing. Paying only the minimum on credit cards means you'll pay far more in interest over time.

A lender's preliminary assessment of how much you may be able to borrow. A rate hold may be offered for a limited period, but terms vary and pre-approval is not a final mortgage commitment; the lender still reviews your application and the property.

A qualification check that uses a higher rate than the contract rate. For most new mortgages from federally regulated lenders, the qualifying rate is the greater of the contract rate plus 2% or 5.25%. Rules and renewal-switch exemptions depend on the mortgage and transaction.

A pool of money from many investors, managed by a professional fund manager who picks the investments. Mutual funds in Canada tend to have higher fees (MERs) than ETFs.

Everything you own (assets) minus everything you owe (liabilities). It's the single best snapshot of your overall financial health. It can be negative, and that's normal when you're starting out.

The CRA's electronic filing system that lets you submit your tax return online using certified software. It's faster than mailing a paper return and gets you your refund sooner.

A letter the CRA sends after processing your tax return. It confirms your assessed income, tax owed or refund, and your RRSP contribution room for the next year.

A fee that may apply when a payment is rejected because an account has insufficient funds. Whether a fee applies and its amount depend on the institution, account, and transaction; check the current account agreement.

A monthly government pension available to most Canadians aged 65 and older, regardless of work history. The amount depends on how long you have lived in Canada. The maximum was $751.97/month at ages 65–74 and $827.17/month at age 75+ from July to September 2026. OAS recovery tax for July 2026 to June 2027 is based on 2025 net income and starts above $93,454.

What you give up when you choose one option over another. For example, the opportunity cost of spending $5,000 on a vacation is the investment growth that money could have earned.

When you spend more money than you have in your chequing account and the bank covers the difference. You'll be charged interest and/or a fee until you pay it back.

Adjusting your investments back to your target asset allocation after market movements have shifted the proportions. For example, selling some stocks and buying bonds if stocks have grown too large.

A legal document that authorizes someone you trust to make decisions on your behalf. A POA for Property handles financial matters; a POA for Personal Care handles health and living decisions. Both become critical if you are incapacitated.

An arrangement where you give a company permission to automatically withdraw money from your bank account on a set schedule, often used for bill payments and subscriptions.

The amount you pay (monthly or annually) to keep your insurance policy active. A higher deductible usually means a lower premium.

The legal process of validating a will and authorizing the executor to distribute the deceased person's assets. Probate fees vary significantly by province — Ontario charges 1.5% on estates over $50,000, while Alberta has a flat maximum of $525.

An annual valuation of your property by a provincial agency (e.g., MPAC in Ontario) used to calculate your property taxes. It may differ significantly from the market value.

How much your money can actually buy. When inflation rises, your purchasing power drops. A dollar today buys less than a dollar ten years ago.

A savings plan for Canadians eligible for the Disability Tax Credit. Contributions are not tax-deductible but growth is tax-sheltered. The government adds matching grants (up to $3,500/year) and bonds (up to $1,000/year) for low-to-moderate income beneficiaries.

Replacement cost pays to replace your item with a new one. Actual cash value pays the depreciated value (what it's worth today). Replacement cost policies cost more but pay out more.

A registered account for saving for a child's post-secondary education. The government adds a 20% grant (CESG) on the first $2,500 contributed each year, up to $500/year.

An optional add-on to an insurance policy that provides extra coverage beyond the standard policy, such as a critical illness rider on a life insurance policy.

An online service that automatically builds and manages a diversified investment portfolio for you based on your goals and risk tolerance. Popular Canadian options include Wealthsimple and Questwealth.

An account you must convert your RRSP into by December 31 of the year you turn 71. It provides regular retirement income with mandatory minimum annual withdrawals that increase with age. Withdrawals are taxable income.

A registered account where deductible contributions can reduce taxable income and investment income is generally tax-deferred until withdrawal. Withdrawals are taxable; whether an RRSP is advantageous depends on your circumstances and tax rates when contributing and withdrawing.

A carrier device-return program — called Bring-It-Back at Telus and Koodo — that lowers your monthly phone payment in exchange for returning the phone at the end of the term. Functionally a phone lease: at the end you either hand the device back or pay the buyout amount to keep it. Worth it only when the buyout is higher than the phone's real resale value.

A bank account designed for storing money you don't need right away. It earns interest but may limit the number of free withdrawals per month.

Secured debt is backed by an asset (collateral) like a car loan or mortgage. Unsecured debt has no collateral, like credit cards. Secured debt usually has lower interest rates.

A form your employer gives you each year showing your total employment income, tax deducted, CPP and EI contributions. You need it to file your tax return.

A form showing investment income you earned outside of registered accounts, such as interest from a savings account or dividends from stocks.

A range of income taxed at a specific rate. Canada has federal brackets (15% to 33%) and each province has its own brackets on top of that.

A tax deduction reduces the income you're taxed on (saving you tax at your marginal rate). A tax credit directly reduces the tax you owe (typically at the lowest bracket rate).

Life insurance that covers you for a set period (e.g., 10, 20, or 30 years). It's straightforward and affordable, paying out only if you die during the term.

A registered account where your investments grow completely tax-free. You contribute with after-tax dollars and pay no tax on withdrawals. Contribution room accumulates each year.

A cheque marked "VOID" across the front. It's used to provide your bank account details (institution, transit, and account numbers) for setting up direct deposit or pre-authorized payments.

The time you must wait after a policy starts before you can make a claim. Common in disability and health insurance. Also called an "elimination period."

Life insurance that covers you for your entire life and includes a savings component (cash value) that grows over time. It's significantly more expensive than term life.