If you’re hoping to save money on medical costs next year, open enrollment is an important time to do it.
When you select coverage for the upcoming year, you may be given the option to contribute to a flexible spending account or a health savings account. Both accounts allow you to divert money from each paycheck into an account you can use to pay for out-of-pocket medical expenses. And contributions to both are exempt from income tax.
If you’re not familiar with how these work, you’re not alone. Only about 19% of Gen Z and millennial workers say they use such accounts and understand the benefits, according to a recent survey from human resources platform Justworks and the Harris Poll.
“Up to 81% are leaving free money on the table,” says David Feinberg, senior vice president of risk and insurance at Justworks.
Here’s how these accounts work, and how much money experts say you should consider putting in them.
How much to contribute to your FSA
If you opt for a traditional, co-pay health insurance plan, your company may also offer an FSA to help you cover out-of-pocket costs. Like money you put in a traditional 401(k), contributions to an FSA are subtracted from your taxable income.
Money in these accounts must be used for medical expenses such as co-pays, medications or out-of-pocket payments for treatments. And because you’re paying with money you owe no tax on, you essentially get a discount equal to your income tax burden. For 2026, you can contribute up to $3,400 to an FSA.
Here’s the catch. In a given year, you typically have until Dec. 31 to spend all of the money in your FSA. Some companies offer a grace period through March 15 to spend the previous year’s funds, and some allow you to roll over a certain amount to the following year — but the overall gist is, use it or lose it.
That can make choosing an amount to contribute tricky. Choose too little, and you miss out on discounts for medical expenses. Choose too much, and you could find yourself scrambling at year-end to spend the money before it disappears.
“The best place to start is to look at your regular health-care expenses that you know you do, like if you go to the dentist twice a year, if you get glasses, if you know you go to your doctor or have prescriptions,” says Carolyn McClanahan, a medical doctor, certified financial planner and founder of Life Planning Partners.
Once you add that up, you can consider it a “baseline” for what you should have in your FSA, she says.
From there, “maybe add a small buffer for unexpected costs like urgent care,” says Feinberg. Even if you contribute a little bit too much, FSA funds can be used to cover a wide variety of medical expenses, including everything from bandages to over-the-counter medicines to prescription sunglasses.
But if it’s your first time contributing to an FSA, don’t overdo it, Feinberg says. “The goal is to save on taxes, not to end the year panic-buying first aid kits just to use up your balance.”
How much to contribute to an HSA
You may decide to enroll in a high-deductible health plan, with a deductible of at least $1,700 for self-only coverage or $3,400 for family coverage. Instead of an FSA, these plans often come with access to a health savings account, or HSA.
These accounts offer what money experts often call a triple tax advantage. As with an FSA, money you contribute to an HSA is exempt from income tax. Should you choose to invest money within the account, it grows tax-free. And as long as you put your withdrawals toward qualified medical expenses, you won’t owe taxes when you take the money out either.
And unlike an FSA, the account associated with an HSA belongs to you. If you move companies or enroll in different insurance, you take it with you. And there’s no “use it or lose it” provision.
For 2026, you can contribute up to $4,400 to an HSA if you have single coverage and up to $8,750 if you have family coverage. When it comes to how much to contribute, the decision is simple, says McClanahan.
“If you’re on a high deductible plan with an HSA, then you should max out your HSA every year, irrespective of your health-care costs or your deductible,” she says. “One, you get a great tax savings, and two, you get to use that tax-free for any health-care expense the rest of your life. So you want to build that account up.”
That can be easier said than done. Workers often choose high-deductible plans because they offer the lowest premiums and therefore the smallest impact on monthly budgets. They may not have a lot of extra money to put away from each check.
But contributing as much as you can to an HSA is worth it, financial pros say. Because you can invest the money in the likes of stocks and bonds, HSAs can be a major retirement asset, even more powerful than a 401(k), provided that you keep growing the account over the years.
“If you start early, you’re compounding savings for future medical costs that will come later in life, including those of your current or future dependents,” Feinberg says.
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