“Help Me, I’m Poor” – Why Everything Costs More When You’re Broke

Help Me, I'm Poor

When you’re poor, everything costs more. It might not make sense, but toilet paper, auto insurance, and even college are more expensive when you don’t have money. Ironically, it’s easier to save money when you already have money in your pocket.

Here’s why.

“Help Me, I’m Poor” – Why Everything Costs More When You’re Broke: Toilet Paper & Groceries

Years ago, researchers at the University of Michigan tracked the toilet paper purchasing habits of more than 100,000 American households (really). The resulting study found something funny: Wealthier households bought toilet paper on sale 39% of the time, but the poorer households only bought toilet paper on sale 28% of the time. The same wealthier homes also bought more toilet paper rolls per purchase than their poorer counterparts–which meant they saved money by buying in bulk.

On average, thanks to sales and buying in bulk, poorer households pay more per sheet of toilet paper than richer households!

This makes sense when you think about it. Buying in bulk at warehouse stores like Costco or Sam’s Club means you have money for an annual membership and time to travel to the store every weekend. If you don’t have a car, it’s much harder to buy in bulk as well. And if you only have money to buy one or two rolls of toilet paper at a time, you will end up paying more.

It’s not just toilet paper, either: Poor households pay more when they’re buying groceries or housewares because of the same effect. If you can’t afford to buy in bulk, and don’t have money or credit cards on hand to load up when there are sales, you pay more.

“Help Me, I’m Poor” – Why Everything Costs More When You’re Broke: Auto Insurance

Not everyone pays the same price for car insurance premiums. For instance, people who rent instead of owning their home or who live in certain ZIP codes pay more. And all these little payment differences mean poor people pay a lot more for auto insurance than their wealthier counterparts.

According to the Consumer Federation of America, insurers charge poor people between 40 and 90% more than their wealthier counterparts on average. Looking at quote data from five major American auto insurance providers, they found that poorer drivers typically get charged more. Interestingly, it has nothing to do with whether these customers are good drivers or not: Auto insurance premiums are higher for poor drivers, regardless of their actual driving record.

“Help Me, I’m Poor” – Why Everything Costs More When You’re Broke: Banking

There’s something funny about banks: When you have more money in the banks, you’ll typically pay lower fees.

Many major banks have monthly maintenance fees that range between $10 and $15 a month for checking accounts, but these fees are usually waived if you have over a thousand dollars in the bank–something that’s hard to do if you don’t have money.

Alternately, if you’re poor, you might not even be able to open a bank account at all because of credit problems or unpaid overdrafts. This means you instead have to use payday loan services and check cashers, all of whom charge high fees for use.

“Help Me, I’m Poor” – Why Everything Costs More When You’re Broke: What To Do

But there’s something to remember: There’s a hustle to everything, and there are always ways to save money and make more money.

Open a low-cost online bank account with Capital One 360 or Ally if you can, or speak with a local credit union. Do your shopping at warehouse stores or discount stores where you pay less for items, and find side work to supplement your income.

In the end, there are two ways to improve your financial situation. You can either make more money or save more money–finding the right way to mix the two is the easiest way to increase your cash flow and have a better life.