Children from low-income families are at heightened risk for a number of poor outcomes, including depression, antisocial behavior, poor physical health and educational failure. Growing up in poverty is generally seen as toxic for children’s development. However, less is known about how the “economic distance” between children and their peers influences behavior and health. This paper examines how both poverty and the growing divide between low-income children and their peers may be influencing low-income children’s life chances. Among wealthy nations, children growing up in countries with higher levels of income inequality consistently fare worse on multiple indices of health, educational attainment and wellbeing. Although evidence has been mixed, new research suggests that low-income children may be experiencing worse outcomes, and a form of “double disadvantage”, when they live and attend school alongside more affluent versus similarly positioned peers. The role that subjective social status (SSS) may play in understanding why some low-income children appear to be suffering in the shadow of wealth is explored, alongside a call for additional research focused on how children come to understand, and respond to, their perceived social status.