A health savings account, or HSA, is such an invaluable account that you should have! Tax-free money saved for your medical bills? Yes, please!
If you know me, you know I'm a fan of having multiple bank accounts. In fact, I recommend having AT LEAST seven accounts, though my family has over 20 at this point (true story). Are you hyperventilating yet? Don't! I promise it's not that weird!
My “7 Bank Accounts Every Family Should Have” post has broken the internet several times, because apparently, it's super weird for people to think about having lots of accounts. Let me tell you from experience that the more accounts you have, the EASIER it is to manage and organize your money.
One of those 7 accounts that everyone MUST have is a health savings account. Want to know more about that? You're in luck! I've got a quick little video that I recorded back in 2017 that'll explain exactly what that is, along with why you should have one!
Watch the health savings account video online or click and watch below:
See, that wasn't so bad right?? Now let's go over exactly what a health savings account is to really tip you over the edge to run and get one! 😉
WHAT IS A HEALTH SAVINGS ACCOUNT?
No! An HSA, or health savings account, is not a virus. It's a legitimate, life-saving (literally, in some cases) TAX-FREE savings account that helps make healthcare more affordable for you and your family!
Think of it the same as any other bank account that you have… It's YOURS! You, your spouse, your family, and even your employer can deposit money into it. Your employer will deduct the amount that you want to contribute to it from each paycheck and deposit it into the account before you get paid, meaning that you're not taxed on the money that goes into that account!
You're able to save your HSA money and then pay for qualified medical expenses when they arrive, such as:
- Medical care
- Vision care
- Dental care
- Long-term care and services
Getting the itch to join the cool kids and get a health savings account already?!
HOW TO GET AN HSA
You can get one through your employer, healthcare provider, bank or credit union when you are enrolled in a high-deductible health plan. This can really save you some money! If your family rarely gets sick, then you should consider moving from the low-deductible health plan. You can then take part of that money that you were paying monthly and put it towards your HSA. Throw the rest of it to your budget to help pay off other things!
(Note: I don't recommend doing this if your family gets sick often or if you have medical reasons that you have to visit the doctor regularly. You're better off with the low-deductible health plan!)
WHAT IF I DON'T QUALIFY FOR AN HSA?
I believe that everyone should have a health savings account, even though everyone may not qualify for one. How can you do this? Make one on your own!
If you don't qualify for a formal HSA, I recommend having a savings account, and setting money aside just for medical expenses. Sure, it's not tax-free like an HSA is. But the concept of setting money aside so a medical bill doesn't eat up your grocery budget is INVALUABLE. A real HSA is top choice, obviously, but second best is a good ol' savings account, just for medical expenses.
And a bonus? Whatever money you put in your HSA with after-tax dollars is tax-deductible! So you may not be getting the benefits of it being tax-free, but you can still deduct the money that you contribute from your gross income on your tax return, which will help you out with your taxes for the year. Score!
HOW TO USE YOUR HEALTH SAVINGS ACCOUNT
With your HSA, you'll get a debit card to use when you go to the doctor or buy your prescriptions. If you're billed in the mail, you can also call in and give them your debit card number to pay, just like with any other card. It's so convenient to use!
HOW MUCH CAN YOU PUT IN AN HSA?
There is an annual limit with how much you can put in your HSA. A single individual can contribute up to $3,500, and a family can contribute up to $7,000. If you're 55 or older, you can bump those amounts up by $1,000.
The good thing? If you don't use everything that's in your health savings account by the end of the year, it'll roll over to the next year! There's no worrying about losing out on that money if you didn't have to use it all. So you could end up having more in your account than the yearly amount that you contribute.
Now you see just why the health savings account is so. darn. important. to our family! It has really changed our life and I can bet that it will do the same for yours!
While you're here, don't forget about my fun video program, Budget Boot Camp! In this online budgeting program, I go into detail on the 7 bank accounts principle, plus many others.
You really don't wanna miss out on this fun! Plus, use the code FCFBLOG at checkout to get 10% off, just because. 😉
Wanting some more great budgeting ideas?
- Save money fast by doing a spending freeze… this week!
- Learn how to spend, save and invest on ANY income by applying the 70% rule.
- Need more help focusing on your finances? Do these weekly challenges and get your finances in order!