A health savings account (HSA) is a separate investing account that you use to pay for everyday medical costs such as doctor visits, prescriptions and other qualifying expenses that fall within your deductible.

The HSA works in conjunction with a high-deductible health insurance plan, at least $1,100 or higher for singles and $2,200 for families.

Monthly contributions are made to your HSA account, just as you would to a 401(k). In fact, you can invest your deposits so that they earn interest while they sit. If your HSA is through an employer, your contributions are made pre-tax; if you're self-employed or make contributions outside your employer, you can deduct them from your gross income at tax time.

To qualify, you need to be enrolled in a high deductible health plan as mentioned above and you can't be covered by a more traditional plan elsewhere (such as your spouse's employer-provided plan).

You can deposit the lesser of $2,850 or your deductible; families can contribute up to $5,650 (or the deductible).

As long as the funds are used for eligible medical expenses (prescriptions, doctor's visits, etc.) your withdrawals are tax-free. And unlike the Flexible Health Spending Account offered by employers, the money in your HSA is not a "use it or lose it" deal. You keep it all - even if you change jobs.

HSA's can offer tremendous savings both in taxable income and insurance premiums - you'll typically pay less for an HSA-qualifying high-deductible plan than you would for a more traditional one.

And since we all know that our health is more likely to deteriorate as we age, having a big chunk of cash set aside for medical expenses - tax-free cash no less - is certainly not a bad idea.

The downside? The high deductible for one. Those with lower incomes could struggle with the added out-of-pocket expense as well as the monthly contributions to the HSA. Families with small children are more likely to blow through their savings before it can accumulate and do them some good.