The “poverty premium” explains why low-income families often pay more for basics like food, housing, and transport. Learn why it happens — and what can change

What is Premium Poverty? Why and How poorer people pay more?

One thing I’ve thought about often is how, strangely, wealthier people often end up buying things cheaper, while poorer people end up paying more. And the reason is simple.

A person with more money usually has more flexibility. They visit stores regularly, they know when sales are coming, and — most importantly — they have the money to take advantage of those discounts when they show up. They have a car, so they can drive to multiple stores and shop around. They can buy something just because it’s a great deal, even if they don’t need it right away — and save money in the long run.

But someone with less money often doesn’t have those options. Maybe they don’t have a car. Maybe they don’t go shopping unless it’s absolutely necessary. And when they finally do need something — say, shoes for their child, a winter coat, or a small appliance — they have to buy it right then. Whether it’s on sale or not. Whether it’s overpriced or not. There’s no room to wait for the “perfect deal.”

So ironically, the person with more money ends up spending less — while the person with less money ends up paying more.

This phenomenon even has a name: economists call it the “poverty premium.” It’s the hidden cost of being poor. From groceries to housing to loans, people with fewer resources often pay more for the same necessities — simply because they can’t afford the flexibility to choose differently.

Think about it: a wealthier family can buy a 10kg bag of rice for less per unit. A poorer family might only be able to afford the small 1kg bag — which costs much more in the long run. Or consider transportation: someone with savings can buy a reliable car upfront, while someone else might scrape together money for an older vehicle that constantly needs expensive repairs. Over time, the second person spends more.

Maybe, one solution would be a better policies and laws that offer better healthcare, transportation, housing opportunities etc. To be honest, I dont' know the solution to this. But, simple advice giving wont do the trick. It is hard for me to believe that someone is simply a reckless spender, without knowing the bigger picture.

That is why, I think saving money is a difficult thing to do. Simply, following sales and discounts is not always easy.