What does daycare have in common with your prescriptions?  Well, one would think the answer would be NOTHING!   But I am here to tell you that your childcare costs and prescription medications can both save you MONEY! 

One thing that I’ve realized over the past few months is that few people at my workplace take advantage of the Flex Spending Account or Dependent Care accounts that our employer offers.   Basically the way this works is that the money is taken out of my paycheck pre-tax.  I pay up-front for the service and submit my receipt for reimbursement.   (Even better…..I do a one-time request for the childcare account and the check is sent automatically.)  This is a big savings for my family because it enables us to stay in a lower tax bracket.   For us, the limit for childcare is $5000 per year (we pay at least $7500 each year)  and $2400 in medical bills.  We take out the maximum for each and use it every year.   That is approximately $7400 pre-tax dollars that we are able to spend.  The money is direct-deposited into our account just a day or two after we request it so it’s very convenient.  I would do this no matter the amount I needed to take out.  It’s totally worth it!   Having the money set aside for medical expenses makes it much less stressful when the kids need to visit the doctor.

One pitfall to avoid in this situation—make sure that you don’t take out more than you’ll actually use.  The daycare expense is fairly easy to estimate since we pay the same amount each week.  For medical expenses, however, you need to consider all areas of your family’s needs.   When I decide how much to take out, I consider (1) prescription medications for the year, (2) planned medical expenses such as co-pays for annual physicals and vision exams, etc., and (3) any extraneous expenses such as dental work or optional surgery.   In the past over-the-counter items were eligible for reimbursement; now only prescription medicines are considered.  If we get to the end of the year and I realize that we have some money still in the account, I will order contact lenses or something so that I don’t lose that money.   Last year my husband had over $3000 in unexpected dental expenses and fortunately we had this money set aside for the Flex Account so it wasn’t an issue for us.

The sign-up period for our employer is usually around October.  I’m not a certified financial adviser or anything, but I’m happy to share my experience to help you save money!  If you are interested in learning more or finding out if your company offers something similar, be sure to contact the Human Resources department at your work.   If you have experience with these programs, I’d love to hear about it.