Saving for a medical emergency increases the likelihood of you having treatment, according to studies. A recent study by the Federal Reserve found that 24% of adults skipped treatment last year because they couldn’t afford the bill. 20% of people said they had an unexpected medical bill in 2021 which shows the importance of saving for one. But what are the best ways to build a health care fund?
Get a health savings account
Two in three Americans have a health savings account (HSA). Health savings accounts were designed for people with health insurance with high deductibles. These accounts are ideal for saving for medical emergencies as they are tax-advantaged accounts, so there’s no tax to pay on the cash you put into them. Despite so many Americans having one, 55% of those with one don’t put any money into them. You can also make money from your HSA to help you in the future. By investing your HSA balance into a mutual fund, you can increase your balance. EBRI reports that an HSA with investments can make $3,420 in a year. In comparison, an HSA with no investments will grow by just $170.
Set up a dedicated savings account
Do you want full control of your health care fund? If the answer is yes then your best option may be a savings account. You can have as many savings accounts as you want and need. It’s always a good idea to have multiple ones. Experts recommend that four is a good number. The benefit of having a savings account dedicated to your health care costs is that you can dip in and out of it as and when medical bills crop up. To make as much money as possible, keep an eye on interest rates across multiple providers. It’s easy to switch your savings account to a different provider so that you benefit financially. When money is in a savings account, you can use a TVM solver to calculate the Time Value of Money. This is a formula that calculates the present values as well as the future value of your savings, so you can see whether your investment is worth the risk.
Sign up to your employer’s health plan
56% of businesses offer some type of health plan to their workers, according to the Kaiser Family Foundation. Single cover and family cover are usually available. The cost of your health insurance will be split between you and your employer so you’ll instantly save cash by signing up to this coverage. The average amount a worker pays is 17% of the premium for single coverage or 27% for family coverage. There are tax advantages with employer health insurance too. The amount your employer puts in is tax-free. Your contribution can also be tax-free, meaning you pay tax on a smaller amount of your income.
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Medical bills can spring out of nowhere. But for the sake of your health, you should focus on building a decent health care fund. These are just a few ways to get started.