Children from poor backgrounds are far less likely to make a successful transition into adulthood than others who are more affluent.
The finding is part of a Smith Family study into disadvantage that looked at the emotional health of more than 5,000 children aged four to seven years.
Disadvantaged children found it three times harder to make the transition from home to school, the report showed.
And 40 per cent faced at least five risk factors identified by the Australian Institute of Family Studies, as negatively impacting their life chances.
These include:
* Child is read to fewer than three days per week.
* Living in a household with less than 30 children's books.
* Mother is unemployed, uneducated and was less than 22 years old when she gave birth.
* Child is of an indigenous background or born overseas.
* Father is absent in child's life.
* Family residence is in a disadvantaged area.
Children who struggle with the transition to adulthood were also more likely to suffer academically and develop emotional and behavioural problems later in life, the report said.
They also have higher school drop-out rates, teenage pregnancy, criminal behaviour and unemployment.
Families classified as disadvantaged are those whose main source of income is derived from government support, or have experienced financial hardship in the past year, including not meeting bills or putting food on the table.
Smith Family chief executive Elaine Henry said the study should be of concern to all Australians.
Australian Institute of Family Studies researcher Diana Smart agreed.
"We found that low income has a negative impact on both family relationships and parents' ability to invest in positive experiences and environments for their children," Ms Smart said.