Financial Planning Jargon Buster

Superannuation - A tax effective way to save for your retirement. It's similar to a managed fund where your money is pooled with other members' money and invested on your behalf by professional investment managers. Generally you will not be able to access this money until you retire.

Simple interest - Paid at the end of a specified term, although if the term is more than 12 months, interest may be paid annually. A term deposit is an example of an account that earns simple interest.

Compound interest - Interest paid on the initial principal as well as the accumulated interest on money you have borrowed or invested. Compound interest is like double chocolate topping for your savings. You earn interest on the money you deposit, and on the interest you have already earned - so you earn interest on interest. An online savings account paying monthly interest is an example of an account that earns compound interest.

Term Deposit - A lump sum is invested for a fixed term and you get a fixed rate of interest over that term.

Managed Fund - A managed fund, your money is pooled together with other investors. An investment manager then buys and sells shares or other assets on your behalf.

Shares- Investing in shares will make you part-owner of a business. Shares can be a sound long-term investment but are very risky to use in the hope of making a quick buck.

Shares may also be referred to as stocks, securities or equities.

Financial Adviser - A financial adviser (also known as a financial planner) is a person or authorised representative of an organisation, licensed by ASIC, to provide advice on some or all of these areas of your finances: investing, superannuation, retirement planning, estate planning, risk management, insurance and taxation.

Income Protection - Income protection insurance replaces the income lost through your inability to work due to injury or sickness. It is an important consideration for anyone who relies on an income.

Smart Tip

Always read the fine print so you know how your policy defines your cover.

TPD - insurance provides cover if you are totally and permanently disabled. Your insurer will define TPD as either when you can't work again in any occupation, or you can't work in your usual occupation. TPD insurance helps cover the costs of rehabilitation, debt repayments and the future cost of living.

Life Insurance - also known as Term Life insurance, or Death cover provides a lump sum payment in the event of the life insured's death; or on diagnosis of a terminal illness, where death is likely to occur within 12 months.


Important Information

This document contains general advice. It does not take account of your objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.

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