PFT #3 - Personal Finance Tip: FSA Funds - Use Them or Lose Them
Updated: Mar 3, 2022
This week’s topic has to do with using up FSA or flexible spending account money that you put away this year.
First off don’t confuse this with an HSA or health savings account. The money that you put aside always remains in your account to spend at your leisure; however, with an FSA the money that you put in that account cannot be used if you don’t spend it by January 1st meaning your account value will go to zero dollars.
This also applies to those that have a Dependent Care FSA which is commonly used for child care; however some employers may provide a grace period to use your funds.
So on the whole this means if you don’t use it, you lose it!
In fact, unused FSA funds go to your employer and they have two options 1) They split it among the employee base in the FSA plan, or 2) They can use it to offset the costs of administering benefits.
So will your employer give this money back to its hard-working people? It’s unlikely. So again, on the whole this means if you don’t use it you lose it!
So what can you do? Of course, spend it! The first thing that you need to do is understand what qualifies under these plans. For the dependent care the items include:
-Institutional-setting care, such as child or adult daycare services, by qualified caregivers
-Summer day camps
-Transportation provided by a caregiver
-Application fees, deposits,
-In-home care, such as a nanny, babysitter (if there to cover for a parent who is at work versus recreational reasons)
As for the FSA, this is much easier to solve as just about anything that you can think of can be applied relating to medical needs. It may be band aids, transportation to an AA meeting, diapers, cold medicine, crutches, Rogaine and even ear wax removal.
Eww! So there are many websites where you buy these items with your hard-earned money. These include CVS, the FSA Store and of course Amazon with their FSA Store.
So hopefully, you can stock up on some items; and here’s a budget tip: Take an account of what you spent this year and it may give some insight on how much that you need to spend next year.