HSA vs. FSA: What’s the Difference and Which One Should You Choose?

What’s a HSA? (Health Savings Account)

HSA (Health Savings Account) is a tax advantaged savings account for people with a high deductible health plan (HDHP). Think of it as a 401k for your medical expenses. Very simply, HSAs are great because of four things:

1️⃣ Pre tax contributions → Lowers your taxable income.
2️⃣ Contributions grow tax free → Invest the money like a retirement account.
3️⃣ Withdrawals are tax free → As long as you use it for qualified medical expenses.
4️⃣ HSA funds roll over year after year → Money you don't use keeps growing, so you can save now and use it later.

An HSA is a great way to save on taxes while simultaneously saving on medical expenses and saving for retirement. So you might be wondering...

Who’s it for?
✅ If you have a high deductible health plan (HDHP).
✅ If you want to save for future healthcare costs (or even retirement!).
✅ If you love tax free growth and investing.

How much can you contribute?
As of 2025, you can contribute up to $4,300 for individual coverage, or $8,550 if you have family coverage.

💡 How I use it in real life:
I don’t have a ton of medical expenses right now, so I pay out of pocket and save my receipts instead of dipping into my HSA. I do this because my HSA is growing like an investment account... tax free🙂. Later, when I need the cash, I can reimburse myself years down the line while my money has been compounding. I'm confident my future me will thank me. 🙌 If you're wondering how I keep track of my medical receipts for future reimbursement, I use Notion to stay organized.

I’ve built a free Notion template that helps me store receipts, track medical expenses, and maximize my HSA savings. If you’d like a copy, I’m happy to share it with you! Just drop your email below, and I’ll send it your way. 😊

What’s an FSA? (Flexible Spending Account)

FSA (Flexible Spending Account) is a pre tax account that helps you pay for medical expenses. Sounds very similar to an HSA but the major difference is you have to use it within the plan year. If you don't use it by the end of the year, the amount you put into an FSA account is gone forever. womp womp. You're probably thinking, "ok... then why even have an FSA account?" FSA is great because of 3 things:

1️⃣ Pre tax contributions → Lowers your taxable income.
2️⃣ Tax savings → If you have predictable medical expenses, contributing to an FSA helps you pay for them with tax free money.
3️⃣ Covers a wide range of expenses → Use it for copays, prescriptions, therapy, glasses, and even wellness products like sunscreen and pain relief items.

So....

Who’s it for?
✅ If your employer offers it. FSAs are generally only offered through an employer.
✅ If you have regular medical expenses (like prescriptions or therapy).
✅ If you want tax savings without the hassle of managing an HSA.

How much can you contribute?
As of 2025, you can contribute up to $3,300 or up to $5,000 per household for dependent care FSA. Make sure you check with your employer's benefit plan because the limit could be lower.

💡 How I use it in real life?
I like to set aside about $500 each year for everyday medical expenses I know I'll need like doctor visit copays, contact solution, sunscreen, and feminine care products. Since FSA money is "use it or lose it," I estimate my costs carefully and always check my balance near the end of the year to stock up on FSA eligible essentials before my funds expire. I made the mistake of contributing too much one year and I ended up buying multiple pairs of presciption sunglasses from Ray-Ban. Eek!

Key Takeaways

So which one is better?

If your company allows, you can get both. But below has been recommended for different situations*:

• If you want long term savings & investing → HSA

• If you just need quick tax savings for medical expenses → FSA

• If your employer offers an FSA and you don't have an HDHP → FSA

• If your employwer offers an FSA and you have an HDHP → FSA & HSA

*Just a reminder to always do your own research before making any financial decisions! This read is based on my personal experience with HSAs and FSAs and is for informational purposes only, not financial advice!

The world is your oyster 🦪. Make sure to carefully assess which is right for you 🙂