BEP2O: Financial Literacy Test

Gross Income

Your total earnings in the form of a paycheque, including hourly wages, salary, commission, bonuses, and other income sources.

Disposable Income

Amount of money left after paying tax, available for investing, saving, or spending on essential/non-essential purchases.

Discretionary Income

The money you can spend freely, left after paying for essential goods.

What is the formula for calculating Disposable Income?

Disposable Income = Gross Income - Income Tax.

Importance of Budgeting

Helps manage finances and set priorities to achieve financial goals and stability.

Active Income

Income earned from operating a business or having a job.

Passive Income

Money created by an asset, earned from investments, interest, or rental properties.

Tax-Free Savings Account (TFSA)

A government initiative in Canada that encourages saving, allowing tax-free withdrawals.

Registered Education Savings Plan (RESP)

Helps parents save for children's post-secondary education with tax advantages and government contributions.

Registered Retirement Savings Plan (RRSP)

Helps Canadians save for retirement with tax-deferred growth.

What is a GIC?

A guaranteed investment certificate where you lend the bank money for a specified period for interest.

What is a Bond?

A loan provided to a business or government in exchange for interest payments.

Market Capitalization

The value of a company on the stock exchange calculated as price per share times the number of outstanding shares.

Blue Chip Stocks

Stocks issued by financially stable institutions with a strong record of growth.

The Rule of 72

A formula to estimate how long it will take for an investment to double by dividing the interest rate into 72.

Good Debt

Debt used for investments that appreciate over time or contribute to financial growth.

Credit Score

A measure of your ability to take on and repay debt, ranging from 300 to 900, with 650 being considered good.

What factors affect credit scores?

Payment history, credit utilization, length of history, credit mix, and new credit/inquiries.

Simple Interest

Interest calculated solely on the principal amount.

What is Compound Interest?

Interest calculated on the principal and also on the interest that has already been added to the principal.

Risk Tolerance

The level of risk that an investor is willing to take, categorized as high, medium, or low.

Portfolio Diversification

Balancing fixed-income and equity investments to meet investment goals.