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How to Save for Medical Expenses

Paying for things like glasses and specialist appointments can really add up, not mention paying your deductible. Accounts such as Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) can be a big help! Both allow you to contribute money from your paycheck before you are taxed on your earnings, which lowers the amount that you pay in taxes and keeps more money in your pocket.

Baby on mother's lap smiling and getting examined by doctor
Average Person Spends on Medical Expenses

According to the Centers for Medicare & Medicaid Services, almost $13,000 on average is spent on medical expenses per person. For the average working person between 19 and 64, that amount drops to about $7,000. Medical bills and debt can be intensely stressful, but there are different ways to lessen this burden.

Pay For Medical Bills and First Aid

While it's true that you can only spend this money on medical expenses, think about all the things you pay for through the course of the year like copays, prescriptions, even first aid. Anything you pay for from these accounts are tax-free! Just make sure you review the fine print and understand what you can and can't buy, as not everything qualifies and there may be certain steps you have to take to make sure the transaction is approved. Otherwise, you may end up having to pay that money back to your account.

Health Savings Accounts

Depending on your medical plan, you may or may not qualify for an HSA. To open one you must be enrolled in a high deductible health plan.

The money you contribute to an HAS can be rolled over from year to year and you can take it with you if you change jobs. If you are not able to open one through your employer, you may be able to open one with a bank or other financial services company on your own and deduct your contribution when you file your tax return for the year that you contributed.

Flexible Spending Account

An FSA is a great option if you don't have a high-deductible health plan. You can use it the same way you would use an HSA and the money is still contributed tax-free, but keep in mind that in most cases you cannot roll over any funds in the account. If you do have money in it at the end of the year, that money is lost to you, so be sure you'll be able to spend it before you commit. You also cannot take it with you if you change jobs, so factor that in when considering handing in your notice.

Health Reimbursement Arrangement/Account

HRAs are similar to an HSA and FSA, but less common. It's an employer-funded group health plan—employees are reimbursed tax-free for qualified medical expenses up to a certain amount per year. In some cases, you can use this money to pay your monthly premiums for a health plan you buy yourself. With this option you might pay more for coverage, use more tax credits than you actually qualify for, or end up with tax penalties unless you fully understand your options.


Generally speaking, HSAs are a bank account you own to pay for eligible health care expenses. It can also be offered by your employer along with a high deductible health plan. FSAs are for eligible medical expenses not covered by your health plan. HRAs are a fund of money in an account your employer owns and contributes to.

Pays for medical expensesYesYesYes
Follows you, not the companyYesNoNo
Balance carries over to the next yearYes, up to the IRS amountDepends on the planYour employer decides
Who can contributeYou and your employerYou and your employerOnly your employer
Contribution limits applyYesYesYour employer decides
Account can earn interestYesNoNo
Use money to pay for plan premiumsYesNoYour employer decides
Want help managing your money?

We're here for you! No question is too small, and with WaFd Bank you also have access to tools and services to help you manage your finances and get the most from your money, like Free Checking* and great rates on savings accounts. Visit us at your neighborhood branch, give us a call at 800-324-9375, or check out what WaFd online banking has to offer.

* Nonsufficient funds fees may apply. Requires $25 to open.