The Beginner’s Guide to HSAs: What They Are and How to Use One

Health Savings Accounts (HSAs) might sound like some accounting term, but they’re actually a super underrated money move. 

With rising healthcare costs, unpredictable money bills, and more people freelancing, an HSA can be your secret weapon that helps you save money on healthcare, all while building a mini tax-free investment account.

The Basics of an HSA

What’s an HSA? A Health Savings Account. You put in pre-tax money from your paycheck, let it grow, spend it on medical stuff, and avoid taxes in three different ways. That’s why it’s also called the triple tax-advantage account!

Do I qualify for an HSA? ONLY if you have an HDHP, also known as a high-deductible health plan. If you’re a freelancer/self-employed or picked the cheapest plan during open enrollment, you most likely have an HDHP. This type of health plan is good for healthy people who don’t have pre-existing medical conditions. It typically has lower monthly premiums but higher deductibles than other types of health plans.

Why do I care? You started caring when you read this article 😉 But for real, every dollar you put into an HSA avoids taxes, grows tax-free, and then you don’t pay tax when you use it for medical expenses. 

It’s like if your 401(k) and your emergency fund had a baby, but for healthcare.

What Can You Use the HSA For?

There are obvious use cases for an HSA:

• Doctor visits
• Eyeglasses
• Dental visits
• Prescriptions
• Therapy sessions
• Ambulance service
• Chiropractor visits
• Hospital care
• Lab fees
• And more

Then, there are more surprising use cases for an HSA:

• Sunscreen
• First-aid kits
• Tampons
• Mental health apps
• Acupuncture
• Air purifiers
• Hand sanitizers
• OTC medications
• Menstrual products
• Family planning and postpartum care
• Wellness and substance abuse treatments
• And more

You can even use an HSA for past medical bills or expenses as long as you have the receipts!

HSA vs FSA – What’s the Difference?

It’s common to mix up HSA and FSA, but there IS a major difference between them. 

An HSA (Health Savings Account) is yours to keep forever, even if you change jobs!

An FSA (Flexible Spending Account) is a use it or lose it type. Your balance WON’T roll over into the next year, so you’re responsible for using up the funds before a new year starts; otherwise, you risk losing the money!

Another major benefit of an HSA is that the money is investable, so you can grow your balance like a retirement account. That’s why people like to pay for things out-of-pocket first to let the money continue to grow in investments so that in the future, they can reimburse themselves for any medical expenses. Keep those receipts!

Overall, an HSA offers a lot more flexibility than an FSA if you don’t mind having an HDHP (high-deductible health plan).

How to Open and Start Using an HSA

Your employer will be a great place to start if you have health benefits provided at work. Ask your Human Resources or Benefits Team what the current options are, and when open enrollment starts on November 1st each year, you’ll be prepared to decide if you want to switch over to an HDHP plan. 

Some employers offer contributions to their employees’ HSA plan, and if that’s the case, take advantage of it, as that’s free money!

If you’re self-employed or if your employer doesn’t offer health benefits, you can still open an HSA as long as you’re enrolled in an HDHP plan. Once you’re in an HDHP plan, you can open an HSA at platforms like Lively or Fidelity.

Similar to other retirement accounts, there is a contribution limit to an HSA as well. 

Individual contribution limit: $4,300

Family contribution limit: $8,550

Individuals age 55+ can contribute an extra $1,000.

Remember, you can break up your contributions into smaller chunks to make the process more manageable. $10 here and there adds up fast; just make sure it’s consistent!

Using an HSA as an Investment Tool

An HSA is fairly underrated, but it’s like an additional health IRA at your disposal that you can utilize to grow your money even further. 

Especially when you don’t need the money now, you can let it grow by investing in index funds or ETFs and then save your receipts to reimburse yourself YEARS later. Yes, as long as you keep the receipts, you can reimburse yourself even 10 years later. Imagine how much money your HSA would’ve grown by then, tax-free! 

TIP: We recommend keeping a folder for receipts, as well as taking a photo, since the ink on receipts can fade over time.

When you withdraw to reimburse yourself, it’ll also be tax-free. Again, this is a triple-tax-advantaged account! 

At age 65, you can withdraw from the HSA for ANY reason, not just medical, making it even more flexible. 

HSA Pros and Cons

Pros:

• Triple tax benefits
• Flexible for current and future health expenses
• Investable like a retirement account
• Yours to keep forever; portable between jobs

Cons:

• You MUST have an HDHP (high-deductible health plan)
• You’ll need to keep receipts and track expenses
• Annual contribution limits

The Money Move

HSAs are really powerful if you know how to use them since they’re triple tax-advantaged, flexible, and great for both short-term costs and long-term health savings. 

They’re great for anyone who wants more control over their health and money! Open one, automate it, choose your investments, and let it quietly grow so that your future self will be glad you did. Health issues are bound to pop up as we get older, so you’ll need that extra money to pay for them AND not worry about taxes. 

FAQs

What is an HSA, and how does it work?

A Health Savings Account (HSA) is a tax-advantaged savings account you pair with a qualifying high-deductible health plan (HDHP). You put in pre-tax money, it grows tax-free, and you can withdraw it tax-free for qualified medical expenses.

Who is eligible to contribute to an HSA?

You must be covered under an HSA-eligible HDHP, not enrolled in Medicare, and not claimed as someone else’s dependent. Certain bronze or catastrophic plans may also count as HSA-eligible in 2026.

What qualifies as an HDHP?

For 2026, the minimum deductible to qualify as an HSA-compatible HDHP is $1,700 for self-only coverage and $3,400 for family coverage.

How much can I contribute?

For 2025, the HSA limits are $4,300 (self-only) and $8,550 (family). For 2026, it increases to $4,400 (self-only) and $8,750 (family). Anyone age 55+ can add an extra $1,000 for a catch-up contribution.

Can my employer contribute to my HSA?

Yes. Employer contributions are allowed and also count toward your annual limit. Contributions made through payroll can provide tax savings both on income and payroll taxes.

What expenses are HSA funds used for?

HSA dollars can pay for a wide range of qualified medical expenses, from doctor visits and prescriptions to vision and dental care, without tax penalties.

Can I keep my HSA if I change jobs?

Absolutely! Your HSA is yours to keep, even if you switch jobs or health plans, and the balance rolls over year after year.

Can I use HSA funds for non-medical expenses?

Yes, but after age 65. You can withdraw money for any purpose without a penalty, but non-medical withdrawals are taxed like ordinary income. We suggest keeping the HSA for medical-related withdrawals only if possible.

How do HSAs compare with FSAs?

Unlike flexible spending accounts (FSAs), HSAs are not use-it-or-lose-it. Your balance stays with you year to year and can be invested, which is the most important method for it to grow.

Read more:

Don’t Leave Your HSA Behind at An Old Job
Know Your HSA Contribution Limits for 2026