Flexible Spending Accounts (FSA) are a benefit set up by some employers for their employees. FSAs allow employees to have up to $5,000 withheld tax-free that they can use toward various health and dependent-care expenses (for example, the cost of day-care.) Funds are either deducted from the account via a debit card, or the employee can submit receipts of eligible purchases, and the funds are credited against the balance in the account.

Flexible Spending Accounts are beneficial because they allow you to bank funds that aren’t taxed by the Federal Government to cover certain out-of-pocket expenses, as well as lower your tax liability.

The only real downside to Flexible Spending Accounts is that if you don’t use up all of the balance in your account by the end of the calendar year, then you lose them for good.

This is the infamous “Use ‘em or lose em” situation that causes many people to scramble during the month of December to find ways to utilize any remaining balances in their Flex Spending Account.