Are Savings Accounts Increasing Inequality?

Author: Mayuri Hebbar

The BRB Bottomline

Health savings accounts may actually be contributing to increasing inequality between the privileged and less advantaged groups.


An unexpected cause of inequality: savings accounts

When we think of savings accounts, we generally view them as a tool to build healthier financial habits and plan for the future. However, as explained by this article, health savings accounts might be contributing to increasing the inequality between the higher income and lower-income individuals, mainly due to the differences in how these groups use savings accounts.

The problem here is that people who are financially better off are more likely to effectively use these savings accounts since they can contribute more, and therefore are able to continue to keep themselves financially secure. However, people who may not be as financially secure, make smaller contributions to their savings accounts. This especially leads to issues when it comes to health savings accounts. Having a smaller savings account means that, in the case of health emergencies, there is less money in savings to be applied to the overall cost. This means that more of the cost comes out of pocket, which ends up being more expensive. As a result, those who are financially disadvantaged continue to be at a disadvantage.

What can be done about this situation? How can this inequality be addressed, and eventually decreased? There are a couple of potential solutions here. For one, recognizing this inequality and adjusting the costs of healthcare to make it more affordable for those who are of lower income, either through government funding or welfare programs is a step in the right direction. Beyond that, passing legislation that requires employers to contribute a certain amount of money to health savings accounts would also help to ease related inequality with regards to financial gain.

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