Glossary

A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z

A

Accumulation superannuation fund

A fund where your retirement benefit depends on the money paid into the fund by you and your employers and the investment return on those funds.

Age pension

A regular payment from the Australian Government to people meeting certain age, asset and income level requirements.

Allocated pension

A pension purchased with a superannuation payout on retirement. The amount of pension received each year can vary at the recipient's choice but within maximum and minimum levels set by legislation. The principal is progressively drawn down each year until it runs out.

Assets

Things that you own. They may be financial items like money, bonds and bank accounts or physical items like houses, land and cars.

B

Bank cheque

A cheque written against the security of a financial institution. This will be more readily acceptable in paying for items than a cheque drawn against a personal account.

Bankruptcy

A process for individuals to be legally declared as being unable to meet their debt obligations. The equivalent process for corporations is known as insolvency.

Bond

A medium to long-term investment instrument issued by governments and companies which pays a regular and fixed interest amount for the term of the investment. The invested funds (principal) are repaid at the end of the term (maturity).

Broker

A person who arranges a contract between you and, for example, an insurance or mortgage service provider. Brokers usually receive a commission or fee for arranging a contract.

Budgeting

Identifying your income and expenses for a certain period so that you know where your money goes and can plan how it might be used in the future.

C

Capital gains tax

A tax which may be payable when certain assets are sold at a higher price than they were purchased at.

Cash management account

A special account offered by financial institutions if balances are kept above a certain level. Interest payable is generally higher than on ordinary savings accounts.

Charge card

A form of credit offered by financial and other institutions for the purchase of goods and services with the balance owing to be paid in full each month.

Comparison rate

A rate that lets you compare the cost of advertised loans, including interest rates and most fees and charges.

Complying pension

A private pension which is generated through the investment of a sum of money. The pension is paid at least annually for the life of the recipient or for a fixed term (related to their estimated life expectancy). The pension has to comply with certain requirements of the Superannuation Industry (Supervision) Act 1993. A complying pension attracts taxation and social security concessions.

Compound interest

Interest calculated on the amount invested or borrowed, as well as the interest already earned or owing on that amount.

Consumer credit code

A law governing most consumer lending in Australia to protect the interests of consumers. It requires credit obligations and liabilities to be set out in a user-friendly way.

Contract

A legal document setting out the terms under which goods and services are provided and accepted.

Cooling-off period

A period during which purchasers of a good or service have the opportunity of deciding not to proceed with a transaction. If this occurs then any money paid out for the transaction should be refunded.

Credit card

A form of credit up to a specified limit which is provided by financial and other institutions. Usually, a minimum balance owing is payable each month with the remaining amount owing attracting an interest charge.

Credit rating

A rating based on a person's credit history. Financial institutions refer to credit ratings when they consider applications for loans and credit cards.

Creditor

A person to whom you owe money.

D

Debenture

A medium to long-term investment instrument issued by companies which pays a regular and fixed interest amount for the term of the investment. The invested funds (principal) are repaid at the end of the term (maturity).

Debit card

A transaction card that draws electronically on your account with a financial institution to finance purchases.

Debt

The amount of money you owe - including mortgages, personal loans and credit card balances.

Debt agreement

A legal agreement for repayment of debts between those who owe and those who are owed money. Less drastic than bankruptcy. It may also be referred to as a personal insolvency agreement.

Defined benefit superannuation fund

A fund where your retirement benefit is defined by a set formula which, for example, may take into account your length of service, salary and age at retirement.

Direct debit

An arrangement for a supplier to obtain direct payment for goods or services provided to you by charging your account with a financial institution.

Dishonour fee

A fee which may be charged by a credit provider if you exceed your credit card limit or account balance as a result of a direct debit payment.

Dividend

The payment to shareholders in a company of their portion of a company's distributed profits. The portion is based on relative shareholdings.

Diversification

Investing in a range of different types of assets. A good way of reducing risk in investing.

E

Early termination fee

A fee which may be imposed if you repay a loan earlier than the stated term.

Encumbered

The status of an item, such as a motor vehicle, on which money is owed.

Equity

The value of an asset after deducting any money owing on it.

Establishment fee

A one-off fee which may apply when you take out a personal or other form of loan.

Excess

The amount of an insurance claim which you are required to pay before the insurer becomes liable to pay on the claim. This amount is specified in the insurance policy.

Exclusions

Events which are not covered under an insurance policy. These are specified in the insurance policy.

Executor

Person specified in a will, or appointed, to administer the provisions of the will.

F

Fixed interest rate

Where interest is paid (received) at a constant rate over the term of a loan (investment).

Funeral bond

A managed fund investment which is payable on the death of the investor.

G

H

Hire purchase

An agreement to purchase an item over time subject to specified payment terms. Ownership of the item is transferred to you when you make the final payment.

Honeymoon or introductory interest rate

A low interest rate offered at the start of a loan. It generally lasts for a short period of time and then changes to a higher rate.

I

Insurance policy

A written contract under which an insurance provider will compensate you if certain specified events occur to things you own, your health, your income or your life.

Interest

Money paid in return for the use of money. If you have money in a savings account, your financial institution pays you interest. If you have a loan, you pay interest for using that money.

Interest rate

The relationship between the amount of money borrowed or lent and the money paid in return for the use of that money. Usually expressed as a percentage per year.

Investment

Using your money to make it grow, for example, by buying property or shares.

J

Joint account

An account with a financial institution which is in the name of more than one person. A joint account is able to be operated independently by those persons.

K

L

Lay-by

When you pay a deposit to buy a good and agree to pay the balance in regular amounts over a certain period of time. You do not take possession of the good until the total amount is paid.

Leasing

An agreement under which the owner of property allows use of that property for a specified period of time in return for set periodic payments.

M

Managed fund

An investment product where you pool your money with that of a number of other investors into a single fund which is then invested in a variety of assets and managed by fund managers.

Mortgage

A legal agreement under which you take out a loan and use the property being purchased as security for that loan.

N

O

Overdraft

A credit facility offered by financial institutions that allows you to withdraw more than the balance of your own funds in your account.

Overdrawn account

When you have exceeded the limit on your credit card or account balances (including any overdraft facility) to meet a cheque you have written or a direct debit obligation.

P

Personal loan

A set amount borrowed for a specified period, usually for a particular purchase or undertaking such as a car or a holiday.

Premium

The price charged by an insurance company for providing insurance cover.

Preservation age

The minimum age for you to be able to access your superannuation benefits.

Probate

A document issued by a court certifying the validity of a will and authorising the executor to administer the provisions of the will.

Product disclosure statement

A document that your financial services provider must give you when they recommend or offer to sell you a financial product. It may be provided in a short-form version and must include information about the product's key features, costs, risks and benefits, and the complaints-handling procedures which apply.

Public (state) trustee

Government agencies or business enterprises established in the states and territories which may be appointed to administer the provisions of a will.

Q

R

Return

The amount of money your investment earns.

Risk

The possibility that your investment may fall in value or earn less than expected.

S

Salary sacrifice

The ability to divert part of your pre-tax salary to pay for certain eligible items such as contributions to your superannuation fund account.

Savings account

An account with a financial institution where your money is readily available.

Scam

A confidence trick designed to cheat you of your money. Often related to an investment proposal offering unrealistic returns.

Security for a loan

An item on which the lender has a claim if you can't meet your repayment obligations for the loan.

Shares

A form of investment where you purchase part of a company. Part of distributed company profits will be paid to you as a dividend. The value of your shares will fluctuate according to market assessment of company performance and prospects, and economic conditions locally and overseas.

Special purpose savings account

An account with a financial institution which may involve regular deposits and no withdrawal until a particular goal or date is reached, such as a 'Christmas Club' account.

Store card

A form of credit up to a specified limit which is provided by certain retail stores. Usually, a minimum balance owing is payable each month with the remaining amount owing attracting an interest charge.

Strata levy

A charge on property owners to provide for the management of the common property of buildings established under strata titles.

Strata title

Under a strata plan a building such as a town house or block of units and its associated land is divided into lots, each of which has a strata title, and common property which is the part of the land and building in the strata plan which does not form part of any lot.

Superannuation

Money that you and your employers put aside in a superannuation fund during your working life to use when you retire.

Superannuation guarantee

An Australian Government requirement that employers pay a minimum amount, equivalent to a certain percentage of your earnings, into your superannuation fund or retirement savings account.

T

Tax file number

A unique number assigned to you by the Australian Taxation Office for the purposes of tax administration for you to quote to employers, benefit and allowance providers, banks and other investment bodies.

Term deposit account

An account with a financial institution where your money is deposited for a set period. A term deposit generally pays higher interest than a regular savings or transactions account.

Transaction account

An account with a financial institution where your money is readily available for handling day-to-day transactions.

U

V

Variable interest rate

Where interest is paid (received) at a variable rate over the term of a loan (investment).

W

Warranty

A document which assures a purchaser about the quality of a product. Sellers may state that they will replace, repair or reimburse a buyer of the product in the event that a product defect occurs under certain conditions and within a certain time period.

Will

A legal document that sets out how you wish your belongings to be distributed when you die.

X

Y

Yield

The rate of return on an investment.

Z