What’s in Our Wallet: Tax Advantaged Savings Edition

We are now in our fourth installment of “What’s in Our Wallet” and I will be covering our Health Savings Account Cash Balance and our Dependent Care Flexible Savings Account.

If you are tuning in for the first time, you can catch up with our first three posts here:

What’s in Our Wallet:  Credit Card Edition

What’s In our Wallet:  Banking Edition

What’s In our Wallet:  Investing Edition

Health Equity

Health Savings Account- Cash Balance

As I have mentioned in both our Net Worth update and our What’s in Our Wallet: Investing Edition posts, we have a High Deductible Health Plan and, as a result, are qualified for a Health Savings Account.  A Health Savings Account (“HSA”) gives us the flexibility to stash away pre-tax money for health related expenses.  But as the Mad Fientist uncovered, this can double as the “Ultimate Retirement Account”!  So as soon as we were eligible for an HSA, we opened one up and began contributing.

The HSA we have is through Health Equity.  Health Equity allows us to invest our savings in index funds, as long as we keep at least $1,000 in “cash savings”.  So if you are wondering why our HSA is showing up in both the Investing Edition and in the Tax Advantaged Savings Account Edition… now you know.

$1,000 = Tax Advantaged Savings reaping a tiny bit of interest each month

Remainder = Tax Advantaged Investing in Vanguard funds (via Health Equity)

Dependent Care Flexible Savings Account

We have a child.  We both work full time.  Child care is expensive.  The End.

There you have it!  With Mr. Adventure Rich and I both working full time, AR Jr. needs a place to play all day.  We are incredibly blessed to live very close to my parents and my mom offered to watch our son several days a week.  We started off with 3 days grandma/2 days daycare, but have since switched to 3 days daycare/2 days grandma when AR Jr. was old enough for the next classroom and the provider had 3 days open in that room.  This balance has been really great for our family!

But even with 3 days a week, daycare is expensive!  Luckily, we are able to save a few bucks by opting into the Dependent Care Flexible Savings Account (“DCFSA”) through my employer.  I have a portion of my paycheck deposited in an account at Health Equity.  This money is taken out pre-tax (yay!).  I then submit a claim and receive (partial) reimbursement for the daycare expenses out of the DCFSA.

A couple notes.  You may have noticed I said “partial reimbursement”.  The IRS caps DCFSA annual contributions at $5,000 per year (including any employer match… my employer generously matches 10% of what I contribute).  Child care costs more than that for the 3 days/week AR Jr. is at the daycare center.  As a result, we are paying a good portion but not all of our child care expenses with pre-tax money.

So there you have it!  Our “savings” portion of the Health Savings Account and our Dependent Care Flexible Savings Account.

Always an Adventure,

Mrs. Adventure Rich