Financial Literacy Month: A Great Time to Learn About HSAs

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Key takeaways:

Financial Literacy Month is devoted to helping people become more informed about money management.
Healthcare spending is a large part of many people’s budgets. That makes it a key piece of financial literacy.
Learning more about HSAs improves your financial literacy and enables you to feel more confident about handling your healthcare expenses.

You’ve probably heard words like “HSA” and “financial literacy” lately. But what do they actually mean? And how much should you pay attention to them?

Quite a bit, it turns out. Because gaining some financial know-how and a bit of knowledge about health savings accounts (HSAs) can make it easier to manage your healthcare costs, save for a more comfortable retirement, and feel more in control of your money.

Financial Literacy Month is an opportunity to demystify these terms and see how a little education can go a long way. So let’s get started.

What Is Financial Literacy Month?

Financial Literacy Month, recognized every year in April, is dedicated to improving the public’s ability to understand topics such as saving, budgeting, investing, and dealing with debt. It’s focused on building not only people’s confidence with money, but their long-term financial well-being.

Smarter healthcare spending is part of financial literacy, too, because many people spend a sizable portion of their budget on medical care. In fact, average health-related expenses amounted to 13.6% of Medicare households’ total spending and 6.5% of non-Medicare households’ total spending in 2022.

An HSA is one of the best tools to help you use your healthcare dollars more wisely.

How Does an HSA Work?

An HSA is a personal healthcare account that you contribute to and use to pay for qualifying health products and services. Many employers offer them as part of their benefits package. But HSAs are also available through private health insurance plans such as those offered through the Affordable Care Act state exchanges. However, you must enroll in a high-deductible health plan (HDHP) before you can open an HSA.

Unlike a flexible spending account (FSA), HSA funds roll over from year to year, meaning you can grow your account and draw from it at any time. The account belongs to you, not your employer. So you can keep it if you change jobs.

An HSA is a powerful tool, but many people aren’t sure how to use it. If you’ve never had one before, it can be tricky to figure out what’s covered, how to get reimbursed for eligible expenses, and what an HSA’s long-term value is. But getting answers to these questions can lead to better financial decisions—not just for your healthcare, but for overall saving, investing, and even retirement.

What Can I Use My HSA For?

One of the biggest questions people have is what they can spend their HSA funds on.

For a healthcare product or service to be covered by your HSA, it must fall under the IRS’s definition of medical expenses, which includes “the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and for the purpose of affecting any part or function of the body.”

In practice, that means healthcare plan costs such as copays and deductibles are covered. But it also means many other expenses qualify, such as:

Prescription and over-the-counter medications
Prescription eyeglasses and contact lenses
First aid supplies
Menstrual care products
Dental and vision expenses

Our Eligibility List® is a comprehensive directory of HSA qualified expenses. You can reference it to get acquainted with what qualifies. Once you see what’s actually eligible (and there are many surprises), you’ll begin to realize the real potential of these accounts and become more comfortable using them.

What Are Some Other HSA Benefits?

In addition to finding out what’s eligible, it’s important to get familiar with the other benefits of your HSA.

For example, HSAs offer what’s known as a “triple tax advantage”:

Your HSA payroll contributions aren’t taxed. You don’t pay income taxes on payroll contributions, and other contributions are tax deductible.
Any dividends, interest, or investment gains from your account grow tax-free.
Your withdrawals are tax free as long as you use the money for qualified medical expenses.

After age 65, you can continue to use your HSA tax-free for qualified medical expenses. You can also withdraw funds for non-medical expenses without penalty. You’ll just pay ordinary income tax, similar to a traditional retirement account.

Financial Literacy Month is an excellent time to learn more about these and other HSA benefits. HSA Store’s Learning Center can walk you through the basics of HSAs, including how to enroll, save, and use them. It’s the perfect place to gain more confidence about how to use your HSA and make smarter financial decisions.

Putting Your HSA Knowledge to Work

Now that you have the HSA basics down, you can start maximizing your account.

One of the best ways to do this is with HSA Store’s Expense Tracker™ App, which helps simplify reimbursement. With an HSA, you can pay for eligible expenses out of pocket and then withdraw money from your account tax-free to pay yourself back.

The app makes this process easier by allowing you to:

Track expenses in one place. Upload your receipt details and keep the information you need for future reimbursement.
Stay organized and audit-ready. Maintain a clear record of qualified medical expenses tied to your HSA.
Plan smarter for reimbursement. Monitor what you’ve paid out of pocket and decide when it makes sense to reimburse yourself.

Using the app is one way to turn your HSA knowledge and financial literacy into action. Now that you know how reimbursement works, you can take advantage of tools like the Expense Tracker™ App to save time and make sure you’re using your tax-free dollars most effectively.

In Summary

When it comes to financial literacy, knowledge is power. Becoming a more savvy saver and spender can also lead to long-term security and peace of mind.

That’s especially true with healthcare. With costs only going in one direction (up), it’s more critical than ever to know how to use tools like HSAs that can help you save on products and services AND serve as potential retirement income.

HSA Store® is here to make sure you get the most from your HSA. Explore our Learning Center and other resources to discover more ways to maximize your healthcare dollars.