Interesting new research shows how the households that would benefit most from cost savings are the least able to access them.
Households generally save money in two ways – looking for good deals and buying in bulk. Interestingly, these money-saving tactics are utilized more by high-income households than low-income ones. This is unfortunate, since low-income households are precisely the ones who would benefit most from the financial savings; but it turns out that saving money in these ways requires resources that most low-incomes households do not have.
The University of Michigan has published a new working paper called “Being Frugal Is Hard To Afford.” Researchers tracked the purchase of toilet paper for seven years by more than 100,000 American families from different financial backgrounds. Toilet paper was selected for the study because it is often sold in bulk, frequently on sale, non-perishable, and easy to store, and a household’s need for it cannot be met by another product.
The researchers found that low-income households are less likely to purchase in bulk because they don’t have enough money to make extra purchases beyond what’s necessary in the immediate present. As a result, they have a smaller inventory stored at home, which forces them to purchase toilet paper at short notice, even when it’s not on sale.
"In sum, the inability to buy in bulk also prevents the lower income households from timing their purchases to take advantage of sales. In return, the inability of lower income households to time their purchases to buy on sale further inhibits their ability to purchase large package sizes, as large package sizes are more affordable when on sale.”
The following graphic comes from a report in The Atlantic about the study:
Where people from lower income households shop is another problem, since the majority goes to grocery stores and drugstores for toilet paper, compared to the cost-saving superstores like Costco and Sam’s Club that are frequented by higher-income shoppers, who then incur greater savings.
It should be noted, too, that higher-income households are more likely to have cars in which to access these (usually distant) superstores and transport large quantities of toilet paper, as well as larger homes for storing bulk purchases.
It goes to show that being poor is, in fact, expensive and that frugality can be a luxury in cases such as this. Researchers affirm that it is not for lack of understanding the system, because when lower-income households receive their pay cheques at the beginning of the month and have greater liquidity for a temporary period of time, they exhibit the same tendencies to save money as higher-income households do – “such that the per-sheet premium they’d been paying compared to richer shoppers dropped by 30 percent” (The Atlantic).