In a dynamic setting, we build a theoretical model to capture the macroeconomic implications of parental biases on poverty traps and income inequality. Less privileged parents have biased perceptions about ‘self-efficacy’. Perceived self-efficacy is shaped by socio-economic backgrounds. We find that biases increase the extent of poverty trap. Without any biases, there exists a poverty trap only when the parental warm glow is low. With biases, there emerges a poverty trap even for moderate warm glow. For high parental warm glow, there may exist a poverty trap. Income inequality in presence of biased parents is always (weakly) higher.