Children born in poverty are three times more likely to have long-term behavioural problems.
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A Ministry of Social Development report shows that within nine months, babies living with material hardship are angrier and react badly to stressful situations.
Those characteristics became more pronounced as they got older.
Children's Commissioner Andrew Becroft said the report should be a wake-up call.
He said children suffering from material hardship were more likely to end up with a poor education and in crime when they grew up.
"We know that long-term education is going to be a challenge. We know that they are, the kids, especially the boys, are at risk of criminal offending.
"So this isn't just a theoretical issue, this [has] significant life ramifications."
Mothers experiencing high levels of material hardship were five times more likely to suffer moderate to severe anxiety.
A child poverty charity says the findings of a report are not surprising. Child Poverty Action Group spokesperson Jeni Cartwright says extending the Working For Families Tax credit would go a long way to preventing these mental health problems.
It's estimated as many as 14 percent of New Zealand children grow up in poverty.