What is a Health Savings Account? HSA Explained for Dummies

A health savings account is a great way to set aside money to pay for medical expenses throughout the year. But how do they work exactly? Here's a breakdown of health savings accounts - HSA explained for dummies!

--------
🎬 NOTES FROM VIDEO
A health savings account is a savings account where you can set money aside on a pre-tax basis to pay for qualified medical expenses.

A health savings account typically comes with a HDHP - high deductible health plan. So your deductible is going to be higher and your premiums will be lower. Most plans will cover 100% of your costs after you hit your deductible - but the deductible is high.

An HSA is not a substitute for health insurance but it comes with it in an HDHP.

Benefits of a health savings account
Set aside money pre-taxed for medical expenses. So just like a 401k, you contribute money from your paycheck pre-tax which reduces your taxable income for the year.
Earnings in an HSA grow tax free. Contributions and interest accrues tax free.
You can withdraw money tax-free when it's used for qualified medical expenses.
You can take the HSA with you if you leave your employer
The money does not "expire" like a flexible spending account. It keeps accumulating and you can still use it years later, even when you retire.

Cons
Might not be right for someone who has a chronic illness or requires expensive medications - the deductible is high therefore you're paying more out of pocket
The contribution limits are capped
Depending on your plan, you might still have a copay after you reach your deductible limit.

--------
💻 SIGN UP FOR BUDGET BOOTCAMP

--------
📝CHECK OUT THE HOW TO CONTROL YOUR SPENDING WORKBOOK

--------
💌 READY TO BUDGET?

--------
🌟SIGN UP FOR FETCH REWARDS! USE CODE WR367 TO RECEIVE FREE POINTS!

--------
❤️️ TRY MADISON REED AT HOME HAIR COLOR KIT

--------
🚘 GET FREE CAR INSURANCE QUOTES WITH GABI:

--------
I’M SOCIAL UP IN HURR:

Disclosure: Links contain affiliates. When you buy through one of my links, I will receive a commission. This is at no cost to you and helps support my channel!

[thetravelingwanderer]

Great video! Just wanted to add a couple points that some people may find useful:
1.) You can also pay for these expenses with a credit card (if you're into collecting points/ miles) then get reimbursed later on (just make sure to keep your receipts).
2.) A lot of professionals also recommend that if you are able to do so, DON'T use your HSA funds and try to pay for things out of pocket now so you can let the money in your HSA grow over 20-40+ years tax free. Additionally, when you reach retirement age, you can withdraw the funds completely tax free and can be used for ANYTHING; not just medical expenses at that point.

[milanimorales]

Thank you for explaining this. I wish videos like this were included on company websites when we have to enroll in benefits.

[HippieP]

I just looked at my hsa and was surprised that there's $$ in there. I love the "set it and forget it"

[nellj]

I always wondered what an HSA was and why my medical insurance didn't have one. Thanks for explaining this! My insurance costs me $90 a month, but it is a low deductible plan so this explains why it doesn't have an HSA attached.

[Luckykat]

Thank you for the info & I just gave the word for my accountant to set up my HSA 🙌🏽

[bosoxereva]

This was really great. My son recently started working and his company has an HSA, but I can't find if they actually have an HDHP (not on insurance card) or just an HSA to help out. Anyhow, was confusing me some for tax purposes and wanted to learn more. If only his company contributes to the fund and he doesn't, it looks like it does nothing to him for tax purposes. Anyhow, I went looking on youtube to learn more and you nailed it. Thanks so much!! New subscriber!

[kaylasmith]

Thank you for providing a clear explanation of what an HSA is, I am making insurance choices for the first time and have been kinda lost in the paperwork that explains my options. I appreciate you 😊 and am happy to say I now have a better understanding of my options because of you 💗

[kattelyn]

We are about to offer an hsa for the first time at my company, and this will really help me explain to our employees! Thank you :)

[laurenrossi]

Thank you for more clarity on this matter

[CitizenScorpio]

Informative video. Already doing research in anticipation for my employer’s open enrollment this fall. Thanks!

[nicksmith]

Oh my god thank you for explaining this in simple language. I felt like my brain was going to rot trying to make sense of this stuff lol. This vid was very helpful.

[michellebainbridge]

We are getting our first HSA account September 1st! Thank you so much for this video. I had so many questions!

[TerryStoa]

Thanks - I'm going to be helping seniors with their taxes this year - and needed to get some basic info on HSAs.

[Murrauder]

Great explanation and amazing pacing for the information to allow time to hear and process the statements!

[jadasmart]

Thank you so much for the valuable information! Your explanation was very clear and I have a much better understanding now

[nickfuchuck]

This was great! I had one and didn’t know they were this good!!!

[cleangreenlawncare]

Incredibly helpful, no fluff, entertaining. 10/10 recommend this video 👍🏽

[swollenmonkey]

Thank you so much for this extremely easy to understand video. Well done!

[nicolejroby]

Thanks for explaining this! It was very helpful

[akjetblue]

Thanks for the info - I’m going to sign up for one at my company, thanks to your thorough explanation!