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Financial Literacy

 
 
 

ASSETS

Tangible or intangible monetary supply that is owned or controlled by the investor or individual used to create positive economic value.

BUDGET

A plan for managing money. Includes dividing expected income and expenses among spending and saving options based on personal financial goals during a given time period.

CONSUMER PRICE INDEX (CPI)

The consumer price index (CPI) is compiled monthly by the Department of Statistics and is a gauge of inflation that measures changes in the prices of basic goods and services.

cost-of-living adjustment (COLA)

An increase in salary or benefits that is given to help you (the individual) keep up to date with increased living costs from the result of inflation.

EMPLOYEE BENEFITS

Additional benefits, beyond a paycheck, offered by employers (e.g., health insurance or pension plan).

EQUITY

An individual’s overall assets deducted from their liabilities

FIXED EXPENSES

Expenses that stay the same from month to month (e.g. cable, mortgage/rent, school fees etc.)

FINANCIAL LITERACY

Describes the knowledge that empowers the masses with the ability to understand and manage money wisely.

GROSS INCOME

The total amount of income from wages before any payroll deductions.

LINE OF CREDIT

A revolving credit arrangement you establish with a lender. The lender sets the credit limit, which is the most you can borrow under the arrangement.

LETTER of credit

A letter from a bank ensuring that the consumer’s payment to the supplier will be received on time and for the correct amount.

Letter of guarantee

While a letter of credit guarantees accurate on-time payment to the seller of the goods and services, a letter of guarantee is a contractual agreement issued by a bank on behalf of the consumer who has entered an arrangement to purchase goods from a supplier and commits to upholding any financial responsibilities to the supplier in the event of default.

LIABILITY

The amounts you owe to creditors, or the people and organizations that lend you money. E.g., Liabilities include a mortgage, car and educational loans, and credit card debt.

NEED

Essentials or basics necessary for maintaining physical life, including food, clothing, water, and shelter, sometimes called material well-being.

NET INCOME

Also called "take-home pay"; it's the amount of income left after payroll deductions.

NET PROFIT

Is the money a business has left after it pays its operating expenses, taxes, and other current bills.

NET WORTH

The value of the assets you own (including cash, securities, personal property, real estate, and retirement accounts) minus your liabilities (what you owe in loans and other obligations).

RETURN

The profit or loss derived from investing or saving.

RISK

The probability of losing or gaining something of value from an investment.

SCAM

A fraudulent scheme performed by a dishonest individual, group, or company in an attempt to obtain money or something else of value (ex: Loom or Pineapple Express).

SAVING

The process of setting income aside for future spending. Saving provides ready cash for emergencies and short-term goals, and funds for investing.

Variable Cost

A cost, which varies with sales or operational volumes.

 
 
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Bahamian Economy

 
 
 

CREDIT DOWNGRADE/UPGRADE

An assessment of the credit risks of a potential borrower such as an individual, business, company or government, predicting their ability to pay back that of which is owed and an estimate of the likelihood of the borrower evading.

CONTINGENT LIABILITY

The potential liability that may occur, depending on the outcome of an uncertain future event.

CURRENCY PEG

A country or government's exchange rate policy whereby it attaches, or pegs, the Central Bank’s rate of exchange to another country's currency. Also referred to as a fixed exchange rate or a pegged exchange rate, a currency peg stabilizes the exchange rate between countries.

DEVALUATION

A deliberate downward adjustment to the value of a country's currency relative to another currency, group of currencies or standard. 

EXTERNAL DEBT

The portion of a country’s debt that was borrowed from foreign lenders including commercial banks, governments or international financial institutions. 

GRANT

A type of financial aid that does not have to be repaid; usually awarded because of financial need.

FISCAL POLICY

The means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.

FOREIGN DOMESTIC INVESTMENT

A business-related investment made by an individual or company from one country to another in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.

GROSS DOMESTIC PRODUCT (GDP)

The total value of all the goods and services produced within a country's borders.

GROSS NATIONAL PRODUCT (GNP)

A measurement of the total output produced by a country’s residents; it is usually calculated by taking the sum of personal expenditure.

INFLATION

A persistent increase in prices often triggered when demand for goods is greater than the available supply or when unemployment is low and workers can command higher salaries.

NATIONAL DEFICIT

The total amount of money, which a country's government has borrowed.

MONETARY POLICY

Consists of the actions of a central bank, currency board or other regulatory committees that determine the size and rate of growth of the money supply, which in turn affects interest rates.

SUBSIDIZED

When the Government of a country pays a part of the cost of products to keep the selling price low for consumers.

UNSUBSIDIZED

A loan in which the borrower is responsible for interest that accumulates on any unpaid for loan. 

VALUE ADDED TAX (VAT)

A type of consumption tax that is placed on a product whenever value is added at a stage of production and at the point of retail sale. The amount of VAT that the user pays is on the cost of the product.

 
 
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Banking

 
 
 

BAHAMAS CENTRAL SECURITIES DEPOSITORY LIMITED (BCSD)

A leading provider of share registry and transfer agency services in The Bahamas.

BAHAMAS FINANCIAL SERVICES BOARD (BFSB)

BFSB represents and promotes the development of all sectors of the financial services industry, including: banking, private banking and trust services, mutual funds, capital markets, investment advisory services etc.

BAHAMAS INTERNATIONAL SECURITIES EXCHANGE

The Bahamas’ securities exchange where stock brokers and traders can buy and sell shares of stock, bonds, and other securities.

BAHAMAS MARITIME AUTHORITY

The Bahamas Maritime Authority's Inspections and Surveys department is primarily responsible for ensuring that registered ships are in compliance with all statutory requirements as set out in the international Conventions and Codes.

CENTRAL BANK OF THE BAHAMAS/INSPECTOR OF BANKS & TRUST COMPANIES

Has the duty to promote and maintain monetary stability, credit and balance of payments conditions conducive to the orderly development of the economy. In collaboration with the financial institutions, the Central Bank has the further duty to promote and maintain adequate banking services and high standards of conduct and management. The Bank advises the Minister of Finance on matters of financial or monetary nature.

COMPLIANCE COMMISSION OF THE BAHAMAS

An independent statutory authority responsible for enforcing compliance with the anti-money laundering rules and regulations found in the Financial Transactions Reporting Act, 2000 (FTRA); the Financial Transactions Reporting Regulations, 2000; and the Financial Intelligence (Transactions Reporting) Regulations 2001, by designated financial institutions, which are not otherwise regulated for this purpose.

CREDIT BUREAU

An agency that collects and researches individual credit information and sells it for a fee to creditors so they can make a decision on granting loans.

DEPOSITORS INSURANCE

Measures implemented to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due.

DISCOUNT RATE

The interest rate charged to commercial banks and other depository institutions for loans received from The Central Bank of The Bahamas.

FINANCIAL INTELLIGENCE UNIT

Receiving, analyzing, obtaining, and disseminating information relating to the proceeds of an offence under the Proceeds of Crime Act 2000. -informing the public, financial and business entities of their obligations under counter-money laundering measures.

INSPECTOR OF FINANCIAL AND CORPORATE SERVICES

The Financial and Corporate Service Providers Act provides a broad regime of regulation and accountability in the provision of financial and corporate services. Under provisions of the Financial and Corporate Service Providers Act, 2000 the Inspector is required to maintain a general review of financial and corporate services in The Bahamas.

INSURANCE COMMISSION OF THE BAHAMAS

Responsible for the regulation of all insurance activity in or through the Bahamas. It is concerned with the ongoing monitoring and control of insurers, agents, brokers, salesmen, underwriting managers and external insurers.

INTEREST RATE

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.

LATE FEE

A penalty on all types of credit for making a payment after its due date.

NATIONALIZATION

The process of transforming private assets into public assets by bringing them under the public ownership of a national government or state.

PRIME RATE

The interest rate that commercial banks charge their most credit-worthy customers that usually consist of large corporations.

SECURITIES COMMISSION

Designed to ensure that adequate disclosure of material information for investment products is available to facilitate informed investment analysis and decisions by the investing public.  Disclosure requirements are designed to be thorough but not burdensome on individuals seeking to invest in or from The Bahamas.

PRIVATIZATION

The purchase of all outstanding shares of a publicly traded company by private investors, or the sale of a state-owned enterprise to private investors.

UTILITIES REGULATION AND COMPETITION AUTHORITY (URCA)

Created to serve as the primary governing body of the new regulatory regime for electronic communications in The Bahamas. URCA, as an independent, well-resourced regulator will oversee electronic communications as well as broadcasting (including cable television) and will control spectrum and numbering.

 
 
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Debt

 
 
 

ADJUSTABLE RATE MORTGAGE (ARM)

An adjustable rate mortgage is a long-term loan you use to finance a real estate purchase, typically a home. The interest rate on an ARM is adjusted, or changed, during its term.

ANNUAL FEE

The amount that credit card companies charge for the use of a credit card.

BAILOUT

A general term for extending financial support to a company or a country facing a potential bankruptcy threat.

BANKRUPTCY

Bankruptcy means being insolvent, or unable to pay your debts. In that case, you can file a bankruptcy petition to seek a legal resolution.

CREDIT

Amount of money a creditor is willing to loan another to purchase goods and services, based the expectation that the money will be repaid as promised with interest.

CORPORATE BONDS

Loans to corporations for a certain period.

CREDIT CARD

A small plastic card issued by a bank, building society, etc., allowing the holder to purchase goods or services on credit.

CREDIT RISK

Credit risk is the possibility that the issuer of a debt security will default, or fail to meet its obligation to make interest payments and repay principal to investors.

COLLATERAL

Assets with monetary value used to guarantee a loan.

CREDIT LIMIT

The maximum amount of credit a lender will extend to a customer.

CREDIT SCORE

Your credit score is a number, calculated based on information in your credit report, that lenders use to assess the credit risk you pose and the interest rate they will offer you if they agree to lend you money.

CREDITWORTHINESS

A measure of one's ability and willingness to repay a loan.

DEBIT CARD

A card used to pay for goods and services directly from a bank account.

DEBT

The entire amount of money owed to lenders.

DEBT CONSOLIDATION

The act of taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones. In effect, multiple debts are combined into a single, larger piece of debt, usually with more favorable pay-off terms: a lower interest rate, lower monthly payment or both.

DEBT-TO-EQUITY RATIO (D/E)

An indication of the extent to which the company is leveraged or financed by credit. Calculated by dividing total long-term debt by total assets minus total debt.

DEFAULT

When a borrower responsible for repaying a loan or making an interest payment fails to meet that obligation on time.

DOWN PAYMENT

A percentage of the total cost of a property that you pay in cash as part of a real estate transaction.

FORBEARANCE

Permitting the temporary halting of loan repayments, allowing an extension of time for making loan payments, or accepting smaller loan payments than were previously scheduled.

Foreclosure

When your lender repossesses your home because you have defaulted on your mortgage loan or home equity line of credit by failing to pay interest and repay the principal you owe on time.

Finance charge

The total dollar amount you pay to borrow that includes the interest that is charged plus any fees for arranging the credit, if they apply.

Fixed-rate mortgage loan

A long-term loan that you use to finance a real estate purchase, typically a home.

Loan

A thing that is borrowed, particularly a sum of money that is to be paid back with interest.

Loan Cancellation

Forgiveness from repaying a portion of a specified loan based on entering an identified profession or volunteer organization or because of other qualifying circumstances.

Loan Pre-approval

An evaluation of a potential borrower by a lender that determines whether the borrower qualifies for a loan, or the maximum amount that the lender would be willing to lend

Loan Term

The length of time you have to pay off a loan.

Mortgage

A legal agreement by which a bank, building society, etc. lends money at interest in exchange for the title of the property with condition that the title would be transferred to the borrower once the debt is paid.

Note

A debt security that promises to pay interest during the term that the issuer has use of the money, and to repay the principal on or before the maturity date.

Promissory Note

A legally binding document signed when you take out a loan. The promissory note lists the conditions under which you are borrowing and the terms under which you agree to pay back the loan.

Repayment Schedule

A calculated list of monthly loan payments over a certain period based on the total amount borrowed and the interest rate in effect at the time of repayment.

Yield

Yield is the rate of return on an investment expressed as a percent usually calculated by dividing the amount you receive annually in dividends or interest by the amount you spent to buy the investment.

 

 
 
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Insurance

 
 

Auto Insurance

A contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. 

Copay

A fixed amount for a covered service, paid by a patient to the insurance company before patient receives service from physician.

Deductible

The amount of money you will pay in an insurance claim before the insurance coverage starts paying for you.

Health Insurance

Insurance taken out to cover the cost of medical care.

Industrial Insurance

Work related injuries and illnesses, and pays for approved medical, hospital, and related services essential to an injured worker's treatment and recovery. It also provides partial wage replacement for injured workers who are temporarily unable to work.

Insurance

An arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

Life Insurance

Insurance that pays out a sum of money either on the death of the insured person or after a set period.

Property & Casualty Insurance

Types of coverage that help protect your possessions (EG House or car) and provide liability coverage if you are found legally responsible for an accident that causes injury to another person or damage to another person's belongings.

Term insurance

A policy that provides a guaranteed death benefit for a set period, such as five, ten, or 20 years, provided you continue to pay the premiums as they are due.

 
 
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Investment

 
 
 

ASUE

Custom of clubbing together a number of persons for monetary aid. A fixed sum agreed upon is given by each at a fixed time (usually every week) and place, under a president; the total amount is paid over to each member in rotation.

ANNUAL PERCENTAGE RATE (APR)

APR allows you to evaluate the cost of the loan in terms of a percentage. If your loan has a 10% rate, you will pay $10 per $100 you borrow annually.

ANNUAL PERCENTAGE YIELD

The effective, or true, annual rate of return. The APY is the rate actually earned or paid in one year, taking into account the effect of compounding.

BAHAMAS DEPOSITORY RECEIPT (BDR)

A negotiable financial instrument issued by a bank to represent a foreign company's publicly traded securities. EG: Emera Inc.

BANK

A for-profit company that is owned by its stockholders and provides saving and checking accounts and other financial services to its customers.

BENEFICIARY

A beneficiary is the person or organization who receives assets that are held in your name in a retirement plan, or are paid on your behalf by an insurance company, after your death.

BROKER DEALERS

A person, company or other organization that engages in the business of trading securities for its own account or on behalf of its customers.

BONDS

Loans to corporations or to the government for a certain period, called a term. You earn interest on your loan investment, and at the end of the term, your bond matures and can be repaid to you by the company.

CAPITAL

Capital is money that is used to generate income or make an investment.

CAPITAL GAIN/LOSS

When you sell an asset at a higher (lower) price than you paid for it.

CAPITALIZATION OF INTEREST

Capitalizing interest means adding unpaid, accumulated interest to the principal balance of your loan. Capitalization increases the total cost of your loan. If you choose to let your interest be capitalized, you repay more money in total than if you pay the interest while you are in school. Whichever option you choose, you are responsible for paying the full amount of all interest on the loan.

CASH FLOW

Money coming into your accounts and the money you are spending over a specific period.

CASH VALUE

Cash value is the amount that an account is worth at any given time.

CERTIFICATE OF DEPOSIT (CD)

An account in which you deposit funds for a set term (e.g., six months or one, two, or five years), with a financial institution, with the promise of a set interest rate. For most CDs, you cannot make deposits or withdrawals to the account during this term.

CHECKING ACCOUNT

Checking accounts are transaction accounts that allow you to authorize the transfer of money to another person or organization either by writing a check that includes the words "Pay to the order of" or by making an electronic transfer.

CLOSING COSTS

Expenses paid to finalize a transaction over and above the cost of property/real estate.

COMPOUND INTEREST

Interest added to the principal sum of a loan or deposit.

COST OF GOODS SOLD

The direct attributable costs of products or services sold.

CREDIT UNION

A financial institution owned by its members that provides savings and checking accounts and other services to its membership at low fees.

CRYPTOCURRENCY

A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

DEPOSIT

A sum of money paid into a bank or building society account.

DISCLOSURE

A document explaining how a financial product or offering works. It also details the terms to which you must agree in order to buy it or use it, and, in some cases, the risks you assume in making such a purchase.

DIVERSIFICATION

The act of spreading the risk of loss over a variety of savings and investment options.

DIVIDEND

A payment made per share to a company’s shareholders by a company.

FACE VALUE

The amount paid to the bondholder at the maturity date, given the issuer does not default.

FAIR MARKET VALUE

The price you would have to pay to buy a particular asset or service on the open market.

FIXED DEPOSIT ACCOUNT

A financial instrument provided by banks, which provides customers a higher rate of interest than a regular savings account, until the given maturity date.

GAMBLING

To stake or risk money, or anything of value, on the outcome of something involving chance.

GROSS INCOME

The total amount of income from wages before any payroll deductions.

MONEY MARKET ACCOUNT

An account that usually pays a higher rate of interest, and it usually requires a higher minimum balance to earn interest than a regular savings account does. You can make deposits and withdrawals.

IDENTITY THEFT

Identity theft is the unauthorized use of your personal information, such as your name, address, National Insurance number, or credit account information.

INCOME

Any money an individual receives.

INTEREST

Interest is the additional amount you will pay to a lending institution to borrow money. In terms of savings, interest is the additional amount you will earn for having your money in a bank account or other savings vehicle.

  • Simple Interest - Simple interest is interest paid only on the "principal" or the amount originally borrowed, and not on the interest owed on the loan.

  • Compound Interest - Interest credited daily, monthly, quarterly, semi-annually, or annually on both principal and previously credited interest.

INITIAL PUBLIC OFFERING (IPO)

The first sale of privately owned equity (stock or shares) in a company via the issue of shares to the public and other investing institutions. In other words, an IPO is the first sale of stock by a private company to the public.

LEASE

A legal agreement that provides for the use of something, typically real estate or equipment in exchange for payment. A lease is usually legally binding, which means you are held to its terms until it expires. If you break a lease, you could be held liable in court.

MUTUAL FUND

A professionally managed collection of money from a group of investors. A mutual fund manager invests your money in some combination of various stocks, bonds, and other products.

Option

The right to buy or sell a specific financial instrument at a specific price, called the strike price, during a preset period.

Portfolio

When one owns more than one security. A portfolio is built by buying additional stock, bonds, annuities, mutual funds, or other investments.

PREFERENCE SHARE

Shares of a company's stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, the shareholders with preferred stock are entitled to be paid from company assets first.

PRICE-TO-EARNINGS RATIO (P/E)

The relationship between a company's share price and its earnings. It is calculated by dividing the current price per share by the earnings per share.

PRINCIPAL

An amount of money you invest, the face amount of a bond, or the balance you owe on a debt, distinct from the added interest on a loan.

PROSPECTUS

A formal legal document that is required by and filed with the Securities Commission (SEC) that provides details about an investment offering for sale to the public.

PYRAMID SCHEME

A business model that enrolls participants via a promise of payments or services for recruiting other participants into the scheme rather than supplying investments or sale of products of services.

Rate of return

Income you collect on an investment expressed as a percentage of the investment's purchase price.

Savings account

A deposit account in a bank or credit union that pays interest on your balance. Some institutions require that you have at least a minimum amount in the account to qualify for earnings.

Stocks

A unit of ownership within a company. The more stocks owned, the higher percentage of ownership. If the company does well, you might receive periodic dividends based on the number of shares you own. Dividends are part of a company’s profits that it gives back to you, the shareholder.

Time value of money

Money's potential to grow in value over time. Money that is available in the present may be considered more valuable than the same amount in the future.

Trust

A legal entity through which a trustee holds title to assets on behalf of a beneficiary or beneficiaries. The trustee has a legal monetary obligation to manage the assets in the best interests of the beneficiary and distribute those assets according to the instructions provided in the trust document, or agreement, that established the trust.

 
 
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Retirement

 
 
 

Defined Benefit (DB) Pension

A type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum (or combination thereof) on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns.

Defined contribution (DC) plan

A type of retirement plan in which the employer, employee or both make contributions on a regular basis after retirement.

National Insurance Board

The organization charged with administering the social security programme. Its primary mission was and is to provide income-replacement in respect of sickness, invalidity, maternity, retirement, death, industrial injury/disease, and involuntary loss of income. 

Opportunity Cost

The benefit a person could have received, but forfeited to take another course of action. 

Emergency fund

An emergency fund is designed to provide financial back up for unexpected expenses or for a period when you are not working and need income.

Retirement Investments

Money you invest over a long period so that you will have money to live on when you are no longer working.

 
 
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