We all know that it is easier for the rich to become richer. But do you know that the poor are usually paying more for everything in life?
The truth is, it is expensive to be poor. Not many people understand why. So we decided to take a look at some of the various reasons.
Groceries and basic necessities
A recent survey done by the University of Michigan’s Ross School of Business, analysing toilet paper purchases among 100,000 U.S. households over the course of seven years, produced stunning results. Low-income households made just 28.3% of their toilet paper purchases while it is on sale, as compared to 40% from richer households.
In the case of groceries, bulk purchases usually provide greater savings. An example would be a 10kg packet of rice going at $20 each with a promotion giving out an extra 5kg of rice when one purchases 2 packets. By forking out $40 and buying two packets at once, consumers can take advantage of the promotion and get an additional 5kg.
However, the inability to do bulk purchase for the lower income group means they tend to spend more on the same thing as compared to everyone else. This can add up to a significant amount of money over the long run.
Poor people are underinsured
With the uncertainty of their next meal constantly looming over their heads, financial planning is the last thing in mind for low-income households. Paying a premium for health insurance seems unimportant when you need money to spend on your next immediate meal.
With zero coverage for their health, and constantly skipping of much needed health care and check ups, it is no wonder that the low-income usually finds themselves being slapped with a bill too huge to cover when they collapse under the toll of their health. This could have been avoided if they have health insurance coverage.
Poverty can prevent people from making smart financial decisions. This includes landing oneself in debt from poor management of credit card loans and other bills. The need to source for extra money to spend might have led to the overuse of credit cards, accumulating a mountain of debt, which the household might have problems clearing. With the interest rate and late payment kicking in, one might end up paying far more for things purchased.
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