Every month $555.55 is taken directly from my paycheck and put into a dependent daycare account.
Every month I write a check to the daycare for $630.
I do not, however, request a reimbursement every month from the DDA.
Instead I tend to let the months build up and then sometime during breaks (usually Winter, Spring Break, and Summer) process the DDA paperwork, get the required signatures, and fax the signed papers to the DDA folks.
Then a few days later, I get a lump sum deposited to my savings account.
Why don’t I just request the money every month? Two reasons.
1. Effort. It takes a lot of mental load to remember to process the paperwork AND take the forms to daycare AND pick them back up again AND fax them in.
2. $555.55 is a lot less than $630. If I let a few months build up, then I don’t have to deal with claim denials followed by the additional $74.45 a month later followed by some smaller number than $555.55 etc. (It used to be I’d have to redo the denied part if I over-requested, but now they send it automatically when the coffer gets refilled, which is nice. Also the direct deposit is much nicer than the checks they used to send.) I have a much better idea of how much is left when I do it in lumps and keep all but the last reimbursement under the amount actually in my account.
Another reason that might make sense if we were tighter on money (and therefore the effort cost might be worth it) is that this DDA can serve as an additional emergency fund– additional savings not in the checking account that could be tapped into in case of emergency. We used to treat credit card savings like that, but these days the amount of credit card rewards isn’t the difference between us being able to buy groceries or not that week. $555.55 isn’t chump change, but our emergency fund these days is large enough to cover most such emergencies, even including things like unexpectedly large tax bills or months late travel reimbursements. Yes, rationally it still makes more sense to keep such money in an interest-bearing account, but not being able to see it still has psychological advantages when it comes to budgeting when you don’t have a lot of slack to play with. (And #2 adds that interest-bearing accounts don’t pay bupkis these days.)
I do process travel reimbursements and rebates right away, but that’s mainly because if I don’t, I’ll lose the receipts or forget about processing them at all. Plus, there’s also no advantage to putting it off– the same number of steps need to be taken no matter when I do the reimbursements– I can’t just do all of my travel for the year at once in one step. With the DDA, I could, in theory, put it off until we’ve spent $4999.95 or whatever I’ve put away for the year on daycare and I’d only have to get one signature and do one fax. I don’t do that either– usually I request 3x/year.
Do you request flexible spending account money and credit card rewards as soon as you can or do you let them build? Why or why not?