There is more to poverty than just lacking money. Poverty is generational very difficult to escape. Paradoxically, it is more expensive to live in poverty than to live with money. It’s important to understand why it exists and why it is so difficult to escape, so we can understand what they are going through, and how we can help.

Poverty is a global issue that plagues every single country. In the United States, 11.8% of the population, or 38.1 million people, live in poverty—with an income of less than $33.26 per day, according to the 2018 census. Recent estimates for global poverty are that 9.2% of the world, or 689 million people, live in extreme poverty on $1.90 or less a day, according to the World Bank. Children remain the poorest age group in America: nearly 1 in 6 lived in poverty in 2018—nearly 11.9 million children.

Poverty is a lot more complex and damaging than just being poor. It is often described in financial terms, but poverty is actually the quality of life. Living in poverty means a life of struggle and deprivation. Children living in poverty often lack access to quality education. Sometimes it’s because their parents cannot afford school fees, there aren’t enough quality schools, or their family needs their children to work. And without quality education, these children grow up being unable to provide for their own children—thus the generational cycle of poverty.

Living in poverty also means not being able to afford a doctor or medical treatment. It means no electricity, limited shelter, and often little to no food on the table. For young children, improper nutrition can mean stunting and wasting which permanently impacts their development. In impoverished countries where many people lack access to clean water and sanitation, poverty means the spread of preventable diseases and the unnecessary death of children. It also means fewer choices for everything in life. People in poverty are even more susceptible to scams and theft due to a lack of education and desperation.

Compound interest is an enabler. In the same way it multiplies growth, it can also multiply debt and poor habits. Sometimes, no matter how many jobs you have and no matter how hard you work, if you can’t afford to pay your bills then you get charged overdraft fees and interest if you’re using credit. In 2020, US banks collected over $30 billion in overdraft fees. These are fees incurred on people whose bank accounts hit negative and were charged a $30 fee for going below $0.

Low-income households use a variety of debt products including mortgages, installment loans, and credit cards. Each of which requires interest to be paid on top of the principle. When someone cannot pay back their loans on time, their credit score decreases which increases the interest they must pay. Paradoxically, banks yearn to provide services to wealthier people (who don’t need their services) but are hesitant to provide loans to those who are struggling financially.

Banks provide incentives to the wealthy by offering high interest on their savings accounts and exclusive perks for them to deposit their money with them, but do not offer the same money earning incentives to those struggling financially because they are not as profitable. Wealthier people also have access to resources that can help manage credit issues, such as financial planners.

It doesn’t help that financial services are promoting more and more lending products that encourage people to spend money they don’t have. While low-income households cannot afford as much, they are a significant population, so financial services influence these customers to take on more debt. You might be thinking, just don’t take on more debt if you can’t afford it! But the lack of quality education plays a large part in financial literacy. And sometimes, a person in poverty needs that loan to survive even though it puts them further into debt.

Financially secure households are able to buy in bulk which greatly reduces their monthly bill in the long run. Lower-income families are forced to buy more frequently and in smaller portions which results in them spending more money for less in the long run. Also, by buying cheaper products, they lack quality and durability, requiring them to be replaced far sooner than families who buy more expensive, higher-quality items. To save money, poor people often buy cheaper processed foods which aren’t nutrient-dense and lead to obesity, malnutrition, and other chronic diseases which hurt them and cost money in the long run. This leads to more health problems.

People in poverty cannot afford to be proactive with their health. They often don’t have the energy or free time to exercise, cannot afford a gym membership, cannot afford vitamins or healthy/organic foods, and often adopt unhealthy lifestyle choices due to their environment. To save money, people in poverty don’t seek professional medical help unless the problem is severe or threatening. By ignoring smaller health issues, it begins to worsen over the years and sometimes causes permanent damage when it could’ve been prevented or treated from the onset. Delegating preventive measures is common for people in poverty but leads to more health issues and financial stress in the long term.

Healthcare inequality is also a big problem. Studies show that poor people are more likely to be ill for several reasons relating to political, social, and economic injustices. In addition, they have limited access to decent hospitals, doctors aren’t in close proximity, medical expenses are too high, and living conditions cause germs and bacteria to spread easier. Often, family members must quit a job to look after a sick family member, which then removes a vital income from an already struggling family. People who cannot afford homes closer to work often mortgage or rent a place far from work. While this is cheaper upfront, it may be more expensive to live far from work.

Another downside to being poor which I found shocking is that renters in low-income areas in the United States derive more profit than renters in more affluent areas. This means that poor people pay more for housing than wealthier people do. “Neighborhoods with a poverty rate of less than 15% have an exploitation rate of 10%—meaning that rents cover 10% of the actual cost of that housing (The actual cost of that rental housing can be paid off in 10 years). But in high-poverty neighborhoods, those where 50-60% of residents live in poverty, the exploitation rate is 25%, meaning that 25% of the value of the property is paid back in a single year of rent.”

Landlords in poor neighborhoods derive a median profit of $298 monthly, compared with $225 in middle-class neighborhoods and $250 in affluent ones.”

Bloomberg

Building wealth is a marathon—not a sprint. But if you know what it’s like to live paycheck-to-paycheck, you know the feeling of needing quick money. This is another reason why it’s so difficult to get out of poverty. People in poverty often must pass on high-yield long-term deals for low-yield short-term gains to pay current bills. Time is the ultimate ingredient for accumulating wealth, and without the luxury of time, it is almost impossible to allow your money to compound.

Generational wealth is built over many years and requires generational financial literacy. The same way that those born into wealth are set up for success, those born into poverty are likely to remain in poverty and their kids will likely also be born into poverty. This is known as the poverty cycle.

“In economics, a poverty trap or cycle of poverty are caused by self-reinforcing mechanisms that cause poverty, once it exists, to persist unless there is outside intervention. … This occurs when poor people do not have the resources necessary to get out of poverty, such as financial capital, education, or connections.” – Handbook of Economic Growth

Oftentimes, people are quick to judge those in poverty because they don’t fully understand their situation. They are seen as lazy, irresponsible, and at fault for being in their position. While some people may in poverty are there due to poor personal choices, the majority of people living in poverty were born and raised into it. They live in a society that makes it near impossible to escape.

First and foremost, without good health everything else goes out the window. Poverty and poor health worldwide are inextricably linked. Poverty is both a cause and a consequence of poor health and it increases the chances of poor health. To make matters worse, people with chronic illnesses or a disability are even more troubled. People with disabilities live in poverty at more than twice the rate of people without disabilities. Poor health, in turn, traps communities in poverty due to the inability to work and puts a strain on finances. And as mentioned above, low-income areas typically only have access to low to mediocre healthcare facilities.

Conflict is one of the most common forms of risk driving poverty today. Typically seen in developing nations, large-scale, protracted violence can grind society to a halt, destroying infrastructure and causing people to flee, leaving behind all their possessions and wealth. Even small bouts of violence may have huge impacts on communities that are already struggling. For example, if farmers are worried about their crops being stolen, they won’t invest in planting.

While poverty causes hunger, hunger is also a cause and maintainer of poverty. If a person doesn’t get enough food, they will lack the energy and strength needed to work, or their immune system will weaken from malnutrition and leave them more susceptible to illness. If a mother is malnourished during pregnancy, that can be passed on to her children leading to wasting (low weight for height) or stunting (low height for age). Child stunting, both physical and cognitive, can lead to a lifetime of impacts: Adults who were stunted as children earn, on average, 22% less than those who weren’t stunted.

Currently, more than 2 billion people don’t have access to clean water at home. This means that people collectively spend around 200 million hours every day walking long distances to fetch water. That’s precious time that could be used working or getting an education to help secure a job later in life. Contaminated water can also lead to a host of waterborne diseases, ranging from chronic to life-threatening. Poor water infrastructure such as sanitation and hygiene facilities can compound this, or create other barriers to escaping poverty.

Climate change creates hunger, whether through too little water (drought) or too much (flooding). Many of the world’s poorest populations rely on farming or hunting and gathering to eat and earn a living. They often have only just enough food and assets to last through the next season, and not enough reserves to fall back on in the event of a poor harvest. So when climate change or natural disasters leave millions of people without food, it pushes them further into poverty and can make recovery even more difficult.

There are many barriers to education around the world, including a lack of money for uniforms and books, a bias against girls’ education, or any of the other causes of poverty. Education is often referred to as the great equalizer because it can open the door to jobs and other resources and skills that a family needs to not just survive, but thrive. UNESCO estimates that 171 million people could be lifted out of extreme poverty if they left school with basic reading skills. Poverty threatens education, but education can also help end poverty. 

The environment also plays a large role in the poverty population. Poor public works and infrastructure determines travel efficiency and can isolate communities living in rural areas. The amount of government support varies by country and some governments with corruption, conflict, or insufficient resources are not able to provide help to those in poverty. Depending on where you live, lack of jobs or livelihoods plays a role in one’s ability to escape poverty. Dwindling access to productive land, often due to conflict, overpopulation, or climate change, and overexploitation of resources like fish or minerals puts increasing pressure on many traditional livelihoods and forces people away from their source of income and food.

While poverty isn’t impossible to escape, it is extremely difficult and depends highly on one’s particular situation. Poverty is a really tricky situation that is a lot more complex than just a lack of money. I don’t know what the ultimate solution is, but universal access to quality education and ensuring that all basic needs are met in order for them to get an education will help a lot of people.

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