3 Helpful Facts About Health Savings Accounts

Written By Mary Beth Eastman
Last updated November 6, 2018

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November 6, 2018

Simple. Thrifty. Living.

Health Savings Accounts (HSAs) are an alternative to relying on insurance to pay for your medical expenses. Essentially, it is a savings account that is used to save money for medical expenses. Creating an HSA comes with several key benefits that make it a good care option. Here is a look at 3 helpful facts about Health Savings Accounts.

HSAs are savings accounts for medical services, and you have to make regular deposits for an HSA to grow. One of the best benefits of an HSA is that deposits are exempt from federal income tax. That means that the amount of money in your HSA is whatever you put into it. While it may not seem like a big deal, it effectively makes your HSA more valuable. If the funds were taxed on deposit, you would have less in your account when you needed it. Instead, it is taxed on the way out so that you have more money that goes toward your medical bill than to taxes.

HSAs are one of the only means of paying for medical services that can grow in value. Insurance is limited by benefits and those benefits are limited by the amount that you pay. HSAs are limited by what you deposit, but that limit fades away over time as the amount of money in your HSA increases. This means that its value is connected to your ability to make deposits. If you make deposits regularly, then it will continue to increase in value.

HSAs are tied to high-deductible health plans. Anyone who has a plan with a high deductible can open an HSA as long as they don’t have another primary method of paying for medical services right away. HSAs were designed to go with high-deductible plans as a way of letting people stay insured for dire emergencies while letting them put their money away in a system that can be used to pay for services later.

If you have a high-deductible plan, look into starting an HSA. It is a highly effective way of making your money do more when you need it. Plus, it helps you break your reliance on insurance to get the medical help that you need.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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