The Writer’s Coin

My company will start offering this option next year and at first I was encouraged—it’s another way for people to try and minimize their expenses and save some money. It’s what a responsible money-manager would do.
But is it?

I began to talk it over with my coworker and his thoughts on it are the following:

“Hell, no!”

Seem a bit rash? Well, like all things, it depends on the type of person you are. Like my post about what budgeting system you use, not every system works for everyone. FSAs are going to work well for you if you have a documented history that tells you how much you spend on health-care related expenses so you can see whether or not you’re saving. It’s too easy to say “Oh I’m saving on taxes so of course I should do it.”

Think about the business behind FSAs. Think about their profits and how much money they make by taking your money and simply holding it in an interest-bearing account. Much the same way banks can charge you whatever they want on things like overdrafts, these companies can keep any money you don’t spend at the end of the time period and there’s nothing you can do about it.

But I wouldn’t just leave that money there!

Of course not, you would find a way to spend it, which is why the Wikipedia description is so on point when it says:

There is a straight-line savings of $800, IF you spend everything in the FSA account AND you need everything you purchase.

The bold AND is the key here. If you start spending on things you wouldn’t have spent money on before, now you aren’t saving money.

For me, I just don’t have enough expenses to warrant signing up for this. Anyway, I fully intend to be in an agency somewhere soon so I wasn’t even thinking about it until my coworker and I started discussing it.

Are you signed up for a Flexible Spending Account? How much money (if you know) are you saving?

Tags: flexible spending accounts, taxes