I speak English. I guess that you do too, since you're reading this. English is my first and primary language, I don't know if that's true for you also. Even for native speakers, English can be an inexact language and that can create confusion. Confusion when talking about financial topics can lead to traps for the unwary.
Financial professionals (like many other professionals in many other jobs) will use words that, in the financial context, have a different meaning than when they are used in "normal" conversation. These folks may also have words and abbreviations that don't occur outside of financial conversations. A good resource to consult for meanings of words, as used in financial context, is Investopedia.
https://www.investopedia.com/financial-term-dictionary-4769738
Investopedia is an American site and so will contain references to some financial items as well as investment & account types that aren't available in Canada. That's fine. The word definitions will be the same. To find out about Canadian investment types you can check the Canada Revenue Agency (CRA) website. A brief overview of common accounts and the CRA web address can be found in Things Financial #5.
So how about bad language in every day life?
In ordinary conversation people may say things that are not strictly true. Something that I hear now and then is a person saying that they paid a bill, like a utility bill, with a credit card. Some credit card companies even encourage this practice and this language. The credit card company is not doing this for the customer's benefit.
Since this column is about language the first thing I'll point out is that no one pays a bill with a credit card. That is bad wording that can lead to poor reasoning. The bill is not paid. The debt has been transferred from one creditor to a different creditor. You still owe the money.
If you transferred your power bill to VISA and then mentioned to your spouse that the bill had been "paid," he or she would be justified in thinking that the debt had been wiped away, not merely delayed. Now your spouse is working with bad information and the upcoming VISA bill is going to be larger than expected. Such language makes financial planning more difficult than it needs to be.
Now some bad language in advertising:
I was in a shopping mall a few months back and walked past a telecom company kiosk. A large poster proclaimed: "You can have it all! And more!"
Hmm?
Of course you can't have more than "All." There is nothing more than "All." By definitions "All" is all there is. Advertisers get away with such a false claim by arguing that the claim they made was so outrageous that no reasonable person would ever believe it. (This is a real, legal defence that has been successful in court.) I think that the acceptance of such an argument allows unscrupulous companies or people to take advantage of customers who are either "unreasonable" or who lack the knowledge & background to understand that the claim is "outrageous."
If a salesman offers you a 'financial security' that guarantees a 15% yearly profit would you know if that was "reasonable" or "so outrageous that no reasonable person would believe it?" A lot of people don't have the background to be able to tell. But I'll tell you that in today's market it is unreasonable. Very probably a set up for a scam.
In finance (and in life) if someone offers you something for nothing or a whole lot for very little you should suspect dishonesty.
Another example of bad language in finance: Reverse Mortgage
Just be aware that there is nothing "reverse" about this arrangement. It's just a mortgage. It's arranged a little differently but it's still just a mortgage. Normally a bank lends you, say, 90% of the value of the house then you make payments that reduce the banks interest and increase your equity in the house. Eventually you own all of the house and the bank owns none.
In the "reverse mortgage" case the bank lends you, say, 50% of the value of the house then every month, rather than taking cash payments the bank takes another piece of your home equity. When the time comes for you to sell or move out of your home the whole mortgage comes due and you have to pay back what you borrowed plus compound interest - all in one chunk.
After all is done, and if real estate spikes upward, you might wind up with a decent payout. Not enough to buy a new house, of course, but something. If you're unlucky, or there's another housing collapse like 2008, you could walk away with nothing. In my opinion it's a big gamble to take with the biggest asset that most families own.
Keep your eyes and ears open for examples of Bad Language in daily life. It can cause misunderstandings in personal interactions and also cause costly grief in financial transactions.
