Posted on Thursday November 10, 2022

A short glossary for smarter money moves

November is Financial Literacy Month—a time to talk about the knowledge and skills everyone needs to make smart financial decisions.

The theme of this year’s campaign is "Make Change that Counts: Managing Your Money in a Changing World." Understanding financial issues and knowing how to manage your money isn’t always easy, especially these days. But we’re here to help!

Empowering youth

At UNI, we’ve always believed that good financial education starts at an early age, which is why we created our School Caisse for future members and clients.

We’ve been helping young Acadians acquire good saving habits and become smart consumers for over 80 years. Our aim is to help them become financially responsible and independent. And it’s never too early to start!

Words to know

Every day, we make decisions about our money, whether we’re buying a carton of milk or deciding to invest in a new vehicle. And with the uncertain economic times we’re living in, gaining more financial independence and becoming a smarter consumer is more important than ever.

Our smartphones are constantly bombarding us with information that can lead us astray if we don’t understand the words and concepts being used. And the further along we get as adults, the more financial literacy becomes an asset and even a necessity for avoiding many of the traps that lead to excessive debt.

To help you understand all that financial jargon, we’ve created tools to explain some of the basic words and concepts as well as some of today’s hot financial topics.

Personal budget

Good money management starts with a personal budget. This essential tool gives you a clear view of your income and expenses and helps you keep track of your spending. No matter what your goal is—avoiding going into debt, paying for your education, saving for a trip, paying off a loan, saving for retirement, or having an emergency fund—your budget is your number one ally. By filling out a simple, standard budget template, you’ll quickly see if your monthly spending is in line with your monthly income, and make any adjustments needed to achieve your goals.

There are a number of tools online that can help you draw up a budget in just a few minutes.

Investments

When you’ve achieved a certain financial stability, it can be a good idea to invest your money. You might think that the only reason people invest their money is to save up for retirement. Although that’s a good reason, it’s not the only one. An investment is a sum of money that you put into the market with the goal of earning interest and benefiting from it in the future. It also gives you a financial cushion, so if you get sick or lose your job or something else happens, you’re better able to weather the storm.

You’d be surprised to see the difference it can make to put aside a few dollars every week or month. Our advisors can recommend the right savings vehicles for your needs, the main ones being an RRSP, a TFSA, and an FHSA. Our experts will help you figure out how you should be saving and what your strategy should be depending on your age.

How to enjoy your life and save

Investing your money doesn’t mean you have to deprive yourself of life’s little pleasures. Far from it! Investing your savings gives you the best reward there is: peace of mind. Why not use Financial Literacy Month as an excuse to map out a solid strategy and take a balanced approach to managing your finances?

Hot topics in finance

Policy rate

News that the Bank of Canada is raising its policy interest rate has become a common talking point in recent months. Canada’s central bank is the only Canadian institution that has the power to print money. It dictates the policies that govern every Canadian lending institution.

The policy rate affects our country’s economy as a whole, as well as your ability to borrow money as a consumer. It’s the central bank’s minimum refinancing rate for all Canadian banking institutions. The important thing to understand is that if the policy rate is low, financial institutions can lend you money at a lower rate, so it costs less to borrow.

But if the Bank of Canada’s policy rate is high, financial institutions have to set their own rates higher when lending money to clients. When the rate goes up on big loans, like mortgages, it means the borrower’s monthly payments will go up and they’ll end up paying thousands of dollars more on their mortgage, especially if they have a variable rate instead of a fixed rate.

The Bank of Canada sets the policy rate about 8 times per year.

Inflation

Inflation is the rate at which prices increase over a specific period, often in relation to the same period the previous month or previous year. The law of supply and demand influences how prices rise and fall. When inflation goes up, you end up getting less for your money at the store.

As you probably noticed, the pandemic affected a number of business supply chains and also brought about changes in our lifestyles, which had an impact on consumer needs and habits. Housing and real estate were particularly affected by the public health crisis. The Bank of Canada works to regulate the economy, which sometimes means taking steps to fight inflation. When inflation runs too hot, the bank will work to curb consumer spending, which sometimes results in a recession.

Recessions

In any given financial cycle, an economic downturn can translate into a recession. That’s when a country’s economic activity temporarily contracts. Generally speaking, it’s considered a recession if the country’s gross domestic product (GDP) shrinks for at least two consecutive quarters. 

What causes recessions? It’s often a domino effect involving multiple factors. These can include rising interest rates, a rising unemployment rate, a financial crisis, or a stock market crash. If businesses and households are carrying too much debt, that can also weigh in the balance.

Rising interest rates

When interest rates go up, it’s best to pay off as much debt as possible. The goal is to pay as little interest as possible, which means targeting the debts with the highest interest rates, such as credit cards and lines of credit, and paying those off first. Cautious spending is also of the essence You may want to put off certain purchases and wait until things settle down before you decide to treat yourself. Spend on things you need—not on things you want.

Have questions? Need more explanations? Feel free to contact one of our advisors. That’s what they’re there for!