Canadian Financial Glossary
48 essential Canadian financial terms explained in plain English — with real CAD examples, TFSA and RRSP context, and zero jargon. Your financial education starts here.
48 termsPlain EnglishZero jargon
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Financial Foundations
(11 terms)Asset AllocationAsset allocation is the strategy of dividing your investment portfolio among different asset categories …→Cash FlowCash flow is the net movement of money into and out of your financial life over a given period — what comes in…→Compound InterestCompound interest is the process by which investment returns earn their own returns over time, causing money to…→DiversificationDiversification is the practice of spreading your investments across a range of different assets, sectors, and…→Emergency FundAn emergency fund is a dedicated pool of savings set aside exclusively for unexpected financial shocks — job loss…→Financial IndependenceFinancial independence means having enough invested wealth that you no longer need to work to cover your living…→InflationInflation is the rate at which the general price level of goods and services rises over time — and…→LiquidityLiquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its…→Net WorthNet worth is the difference between everything you own (your assets) and everything you owe (your liabilities)…→Passive IncomePassive income is money earned with little or no active, ongoing effort. Unlike a salary, passive income flows in…→RESP (Registered Education Savings Plan)A Registered Education Savings Plan (RESP) is a tax-sheltered account for saving toward a child's post-secondary…→
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Investing & Wealth Building
(13 terms)Bear Market / Bull MarketA bull market is a period of rising asset prices and investor confidence. A bear market is the opposite — a…→Capital GainsA capital gain is the profit you make when you sell an asset — stocks, ETFs, property, or crypto — for more than…→Dividend InvestingDividend investing is a strategy focused on building a portfolio of stocks or funds that pay regular cash…→Dollar-Cost Averaging (DCA)Dollar-cost averaging (DCA) is an investment strategy where you invest a fixed dollar amount at regular intervals…→ETF (Exchange-Traded Fund)An ETF, or Exchange-Traded Fund, is a type of investment fund that trades on the Toronto Stock Exchange (TSX) …→Expense Ratio (MER)The Management Expense Ratio (MER) is the annual fee charged by a fund — such as an ETF or mutual fund — expressed…→FHSA (First Home Savings Account)A First Home Savings Account (FHSA) is a registered account introduced by the Canadian government in 2023 for…→GIC (Guaranteed Investment Certificate)A Guaranteed Investment Certificate (GIC) is a deposit you lock with a bank, trust company or credit union for a…→Index FundAn index fund is a type of investment fund designed to track the performance of a specific market index — such as…→RebalancingRebalancing is the process of realigning your investment portfolio back to its original target allocation after…→Risk ToleranceRisk tolerance is the degree of variability in investment returns that you are willing and able to withstand. It…→TFSA (Tax-Free Savings Account)A Tax-Free Savings Account (TFSA) is a registered account introduced by the Canadian government in 2009 that…→Time in the Market'Time in the market beats timing the market' means that consistently staying invested over a long period produces…→
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Retirement & FIRE
(14 terms)Barista FIREBarista FIRE is a hybrid strategy where you accumulate enough invested assets to cover most living expenses, then…→Coast FIRECoast FIRE is the point at which you have invested enough that — even without investing another dollar — compound…→CPP (Canada Pension Plan)The Canada Pension Plan (CPP) is a mandatory, contributory public pension that replaces a portion of your…→Fat FIREFat FIRE prioritises a comfortable, high-spending retirement — typically $120,000 CAD/year or more — requiring a…→FIRE (Financial Independence, Retire Early)FIRE stands for Financial Independence, Retire Early — a movement built around aggressive saving, smart investing…→FIRE NumberYour FIRE number is the total amount of invested assets you need to retire or achieve financial independence. The…→Lean FIRELean FIRE is a version of FIRE built around achieving financial independence on a modest, intentional budget …→OAS (Old Age Security)Old Age Security (OAS) is a monthly pension paid to most Canadians aged 65 and older, funded from general…→Retirement PortfolioA retirement portfolio is the collection of investments you accumulate over your working life, specifically…→RRIF (Registered Retirement Income Fund)A Registered Retirement Income Fund (RRIF) is the account an RRSP converts into for the drawdown phase. The…→RRSP (Registered Retirement Savings Plan)A Registered Retirement Savings Plan (RRSP) is a Canadian tax-advantaged account designed for retirement savings…→Safe Withdrawal Rate (SWR)The safe withdrawal rate (SWR) is the maximum percentage of your portfolio you can withdraw each year in…→Sequence of Returns RiskSequence of returns risk is the danger that the timing of investment returns — not just their average — can…→The 4% RuleThe 4% rule states that if you withdraw 4% of your investment portfolio in the first year of retirement, then…→
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Crypto & Alternative Assets
(6 terms)AltcoinAn altcoin is any cryptocurrency other than Bitcoin. The landscape ranges from Ethereum — available as a regulated…→Bitcoin (BTC)Bitcoin is the world's first and largest cryptocurrency — a decentralised digital currency that operates without a…→BlockchainA blockchain is a decentralised digital ledger that records transactions across a network of computers in a way…→Crypto WalletA crypto wallet stores the private keys needed to access and manage your cryptocurrency. It does not hold crypto…→Dollar-Cost Averaging in CryptoDollar-cost averaging in crypto means investing a fixed CAD amount into cryptocurrency at regular intervals…→Market CapitalisationMarket capitalisation is the total market value of an asset, calculated by multiplying the current price by the…→
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Debt & Budgeting
(4 terms)50/30/20 Budget RuleThe 50/30/20 rule divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for…→Debt-to-Income Ratio (DTI)Your debt-to-income ratio (DTI) compares your total monthly debt payments to your gross monthly income. In Canada…→The Avalanche MethodThe debt avalanche method pays off debts from highest interest rate to lowest, regardless of balance. It minimises…→The Snowball MethodThe debt snowball method pays off debts from smallest balance to largest, regardless of interest rate. Once the…→
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