Glossary of terms

Numbers may be the same across cultures, but words, particularly financial terms, are not. Here is a glossary of some key terms you might come across when researching and investing in RRSPs in Canada.

Bonds: An obligation or loan made to an issuer, such as a government or a company. In turn, the issuer promises to repay the principal of the bond on a fixed maturity date and to make regularly scheduled interest payments.

Canada Savings bond: Issued by the Canadian and various provincial governments, Canada Savings Bonds typically pay a minimum guaranteed interest rate, carry no fees and are cashable at any time.

Contribution limit: The maximum deduction that may be claimed for an RRSP contribution in any year.

Equities: Pieces of a company, also known as "stocks." When you buy stocks or shares of a company, you're basically purchasing an ownership interest in that company.

Guaranteed Investment Certificate: A GIC is a note issued by a trust company with a fixed yield and term. They are generally non-redeemable before the term is complete.

HOME BUYER'S PLAN (HBP): A program that allows first-time home buyers to withdraw up to $20,000 from an RRSP for a down payment on a home. This withdrawal is not taxed as income and no interest is owed on those funds.

Investor profile: Based on your goals, time horizon and tolerance for investment risk, your investor profile tells you if you are a conservative or more growth-oriented investor.

Mutual fund: A collection of stocks, bonds and other securities that are owned by a group of investors and overseen by experienced fund managers.

Registered Education Savings Plan (RESP): A convenient and tax effective savings plan to ensure that you have funds available to help pay for the post-secondary education your children.

Treasury bill: The safest type of short-term debt instrument issued by a federal government. T-bills are highly liquid and very secure.