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Ask Dave

Daycare Savings

It's awesome to use a flexible spending account for nursery and daycare expenses, as long as you don't overfund them.

QUESTION: Dave and his wife want to use a flexible spending account to pay for a nursery and daycare. Should they do this?

ANSWER: That’s awesome. The only downside is you can’t overfund them. Any money that’s not used by year’s end, you lose. Underfund it … do 11 months in daycare for 12 months. It’s a great idea because every $1,000 you spend on daycare, you’re using pretax money. In a sense, it’s like Congress is paying $300 of every $1,000 of your daycare bill.