How to Invest Using a Health Savings Account

When an individual enrolls in a Health Savings Account, he or she has a wide variety of options to choose from when it comes to deciding where to put his or her savings. Similar to an IRA, funds deposited into a Health Savings Account can be invested into a wide variety of high interest-yielding investments, such as stocks, bonds, CDs, and money market accounts.

Here is some general information about potential investment options for Health Savings Account investments.

Check with the Health Savings Account provider

Individuals wishing to enroll in Health Savings Account plans need to establish their Health Savings Accounts with a bank or other Health Savings Account provider. Health Savings Accounts correspond to high deductible health insurance plans, but they are not available through health insurance companies because of federal laws.

All banks and investment brokers have their own guidelines and rules about what types of investments individuals can make through their Health Savings Accounts. For example, some banks only allow their members to invest in certain families of mutual funds. Therefore, before establishing a Health Savings Account with a particular financial institution, participants need to be sure that they are comfortable with any investing parameters and regulations that a financial institution sets forth.

Guaranteed investments

When it comes to investments into high interest yielding sources, there are two basic differences between investment options: guaranteed investments and non-guaranteed investments. A guaranteed investment is one that has growth that investors can rely on. This growth is an established percentage of the entire amount of the investment. For example, a CD is a guaranteed investment because the money that a participant deposits into a CD will grow in a predictable manner for a predetermined length of time.

Other guaranteed investments include any vehicle that provides measureable growth for a predictable amount of time, such as a high-interest savings account type similar to a CD.

Non-guaranteed investments

The majority of high interest-yielding investments will not be guaranteed. These may include stocks, bonds, money market accounts, and mutual funds. In the best case scenario, funds that are contributed into a non-guaranteed investment will grow, but the growth is not predictable, as it is generally determined by macroeconomic conditions.

In some cases, such as with a money market account, the investor will earn a high percentage rate on the amount of money that he or she has contributed to the money market. The investor does not have to purchase anything. Therefore, the investor can withdraw money at any time, such as when he or she begins to lose principle.

However, in other cases, the investor will need to purchase a commodity, such as a number of stocks. In such a case, the investor will need to sell the commodity in order to remove his or her money from holding. Sometimes in this type of investment, the investor may lose money before he or she is able to sell the commodity.

Health Savings Account holders do not need to make investments

Whenever someone opens a Health Savings Account, it is important for him or her to realize that the funds deposited into the Health Savings Account do not need to be invested into a high interest-yielding vehicle. Instead, those funds can merely be retained as cash in the account. When the funds are held as cash, they are also readily accessible for use when the Health Savings Account holder wishes to use them to purchase qualifying health care services or products - or even non-qualifying items.

Individuals wishing to open Health Savings Accounts should speak with a qualified health insurance broker for more information about HSA plans or to learn more about their options regarding their Health Savings Accounts and corresponding high deductible health insurance plans that suit their needs and lifestyle.