We’d love to believe that our children are indestructible – that they’ll outlive us in great health. But whether your child was born with a disability, develops an autoimmune disease early in life, or becomes ill later in adulthood, saving for your child’s future health can be a wise option for all parties. As a parent, there are several different ways you can approach this process.
Traditional Savings Options
Health Savings Accounts (HSAs) are the standard option when it comes to saving for health expenses. Unfortunately, they can only be used with health insurance plans that have a minimum of a $1,300 individual or $2,600 family deductible. This is an already burdensome amount for many families, and especially for those handling significant health issues.
If you open an HSA for your child, however, you’ll be eligible to deduct that investment from your taxable earnings. This can help balance out the overall financial investment of opening an HSA while also paying significant insurance premiums. Since you can also deduct medical costs that exceed 10 percent of your adjusted gross income, smart tax preparation can help your family manage medical costs.
Savings In The Face Of Disability
HSAs are great if you just want to prepare for your child’s future in light of their current health, but if your child has a significant disability, an ABLE account might be a better option.
An acronym for Achieving a Better Life Experience, ABLE accounts are specifically designed for those with disabilities and are modeled on 529 college savings accounts. That means they’re tax exempt and are designed for those who were disabled before the age of 26. Though people can open these accounts in adulthood if they were disabled early in life, the account will be more valuable to your child if you open one and begin investing in it early.
The main advantage of opening an ABLE account for your child is that it will protect them from living in poverty if they can’t work and you aren’t around to support them. Current SSI/SSDI coverage demand that recipients have almost no income or savings in order to qualify, but ABLE accounts are exempted. This means that many disabled adults end up homeless or reliant on external support, but ABLE accounts allow for future independence.
Even if you predict that your child’s disability won’t fully prohibit them from working, many disabled adults are limited to low paying positions or even sheltered workshops due to their health or cognitive capacity. Since ABLE accounts can be used for everything from adaptive technology to housing, they can help bridge the gap between your child’s future income and their daily needs.
Many of the details of ABLE accounts vary by state because they’re still fairly new. If you’re considering opening one, you should consult with local financial experts and disability advocates. They can help you establish the most beneficial structure for your family.
Your child’s future health is not a sure thing, but one thing that’s certain is you won’t always be able to take care of them – at least not in person. If you open an HSA or ABLE account for them, as appropriate, however, you can offer them another layer of protection. Start saving now for the years to come; your child will thank you.