You might set aside money each month to pay for things such as groceries and bills. And maybe you have a “rainy day” fund for emergencies. A health savings account (HSA) is just like that rainy-day fund. But it’s for health care expenses.

If you have an HSA, you might be wondering how much to put into it each month. There’s no number that’s right for everyone. The amount you set aside will depend on how you plan to use the account.

Here are some things to know to help you decide.

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How does a health savings account work?

A Health Savings Account (HSA) is a type of savings account that lets you set aside money income-tax-free. You can open an HSA only if you’re enrolled in a qualified high-deductible health plan (HDHP).

This is a health plan that has lower monthly premiums. A premium is the monthly fee you pay to have health insurance. Preventive care should still be covered with an HDHP.¹

However, deductibles tend to be higher with an HDHP. A deductible is the amount you must pay out-of-pocket for care before your health plan starts to pay. An HSA can help you cover some of your out-of-pocket costs.

An HSA works a lot like a flexible spending account (FSA). But the money you put into your HSA rolls over year after year. It’s yours for life. And you can invest your HSA funds in things like mutual bonds. That way, they have the potential to grow over time, like a retirement savings account.

You can use your HSA funds to cover care for you and your family. Qualified expenses include:

• Coinsurance
• Copays
• Dental and vision care, like prescription glasses or contacts
• Deductibles
• Over-the-counter medicines, like pain relievers and cold medicines
• Prescriptions

But that’s not all. There are many other items that qualify for HSA dollars too. Learn more about the surprising things you can buy with your HSA funds. This includes things such as sunscreen and travel for medical care.

Each time you use your HSA, you save up to 30% with pre-tax dollars.* Save on hundreds of health expenses from copays and prescriptions to acupuncture and sunscreen. See what you can buy.

*Savings compares using pre-tax income in your HSA to using after tax income for purchases and assumes a 30% combined tax rate from all applicable federal, state and FICA taxes. Results and amount will vary depending on your circumstances.

How much should I contribute to my HSA? And how can I use the funds?

The amount you put into your HSA will be different from the next person. And there’s a limit on that amount. Each year, the Internal Revenue Service (IRS) sets the limit. In 2023, you can contribute no more than $3,850 for an individual plan or $7,750 for a family plan.

Remember, your HSA funds rollover year after year. Contributing the max amount every year will give you the most tax benefits. And it will help build your savings for the future.

But we know not everyone can afford to contribute the maximum. Here are a few ways to help you figure out the right amount for you and your family.

1. As an emergency fund. Accidents and emergencies can happen anytime. And they can be expensive. For example, fixing a broken leg can cost up to $7,500. And the average cost of a 3-day hospital stay is around $30,000, according to Healthcare.gov.²

So an HSA can be a good place to save money for an emergency. Plus, you’ll get the benefit of setting aside money income-tax-free.

It’s impossible to know exactly how much you’ll need. If you can’t contribute the max, a good place to start is to contribute at least enough to cover your health plan’s deductible.

This is a good rule of thumb for anyone with an HSA. Aim for enough HSA money to cover your deductible. It can make a huge difference in paying off medical bills.

2. For medical expenses you know you’ll have. You might already know how much you’ll spend on medical care in the coming year. Maybe you have a medicine that costs $50 a month. Or you know you’ll need surgery in the new year.

Add up everything you expect to spend out of pocket for the year. Then contribute at least that much to your HSA.

Remember, your health plan covers preventative care. But some expenses won’t be covered until you meet your deductible.

3. For other everyday expenses. You don’t have to spend your HSA dollars only on medical bills and prescription medications. You can buy many other things related to your health. Per the IRS, these include things like:³

• Breast pumps and nursing supplies
• Condoms
• Menstrual care products such as tampons and pads
• Over-the-counter medications such as pain relievers and allergy medications
• Prescription eyeglasses (including sunglasses), readers and contacts (and contact lens solution)
• Sunscreen

Take advantage of the tax benefits of your HSA to buy these everyday supplies. Just be sure to hold on to your receipts for these items. Keep them with your tax records. You may have to prove that you spent your money on qualified products.

4. As a savings account for medical expenses when you’re older. If you’re young and healthy now, your health care costs are probably pretty low. You might not see the point of putting a lot of money into your HSA.

But keep in mind that medical expenses tend to go up as you age. To prepare, you can use your HSA like a retirement account.

If you can afford it, you might want to contribute the maximum amount each year. If you’re older, you may be able to contribute more than the max. People 55 and older can put away an extra $1,000 each year.⁴ So take advantage of this if you can.

Bottom line: You’ll get the most tax benefits from your HSA if you contribute the max amount each year. But don’t worry if you can’t contribute that much. You can still be smart about how much you put away by thinking about how you want to use the account.