Big savings is the reason why. 

Having an FSA is like getting a 15%  or a whopping 30% discount on health care.  You can save hundreds to thousands of dollars on health care, childcare and dependent care.  That is because your contributions to the FSA are pre-tax and that reduces the taxes you pay each year.   In essence, the higher your tax bracket, the higher your potential savings. 

An FSA lets you set aside money for health care, childcare and dependent care expenses next year.  The money is deducted from your paycheck before taxes, which leads to the big savings.  The catch is you must budget it carefully.  That is because if you don’t use it, you’ll lose it.  The FSA only lets you carry over any unused money up to $500 to next year.

How much can you put into the FSA account?  That is up to your employer and the state you live in.  The maximum of 2018 is $2,650 for the Health Care FSA and $5,000 for the Dependent Care.  The money you set aside for the FSA will be spread out over the next year and automatically deducted from each paycheck.

Because any money you don’t use for the year, you’ll lose it.  Gone.  You want to set aside enough to cover your eligible expenses, but you don’t want to set aside too much and end up losing your contributions.  For example, you plan to contribute $1,500 to the FSA.  At the end of the year, you only use $200.  You are allowed to carry $500 over to next year.  You end up losing $800.  ($1,500 – $200 – $500).  Do plan carefully.