What is one feature that characterizes health savings accounts (HSAs)?

Health savings accounts (HSAs) are specifically designed to allow individuals to save money for medical expenses with favorable tax treatment. One of the key features of HSAs is that the funds within the account grow tax-free, meaning that any interest or investment earnings accrued are not subject to taxation as long as the funds are used for qualifying medical expenses. Eligible expenses typically include costs such as deductibles, copayments, and other healthcare-related expenses that meet IRS criteria.

This tax-free growth encourages individuals to save for future healthcare costs, making HSAs an attractive option for those who want to manage their healthcare spending effectively. Additionally, if the funds are used for qualified medical expenses, withdrawals are also not taxed, which further enhances their financial utility. Thus, the characteristic of tax-free growth for qualifying medical expenses highlights HSAs' role in promoting savings for healthcare rather than education or enforcing mandatory spending requirements.