Journal of Financial Planning, January 2001

The Psychological Impact of Sudden Wealth

by Eileen Gallo, Ph.D.

A book review in The New York Times changed the course of my professional career. I had gone back to graduate school to get my Ph.D. in psychology. One Sunday morning I came across a review of Susan Litwin’s Postponed Generation, in which she argued that American youth were taking an extra ten years to reach emotional and financial maturity. My husband, an attorney specializing in estate planning, and I used Litwin’s book as the basis for an article examining some of the psychological and sociological issues involved in developing estate plans for affluent families with adult but immature children.

I soon found myself interested in the many psychological issues posed by affluence. For my doctoral dissertation, I devoted two years to a study of individuals who had acquired sudden wealth as the result of IPOs, lottery or similar gambling winnings, and unexpected inheritances.

My study had several objectives, including finding out how early environment affects adjustment to the acquisition of sudden wealth and how recipients of sudden wealth differ in their adjustment to the experience. Each interviewee was asked questions designed to obtain information about their childhood experiences with money, their adult experiences with money before becoming suddenly wealthy, and the effect that sudden wealth had on their life. The participants were free to bring up other issues for discussion during the interview. For statistical purposes, I developed a five-step continuum, ranging from entirely positive to entirely negative reactions to sudden wealth. Participants were assigned to the continuum based on interview criteria. For convenience in this column, I have compressed the results into three categories: Positive, Neutral and Negative.

Before my study, relatively little psychological and sociological research had been undertaken in this area and practically all studies concentrated exclusively on lottery winners. These studies found no measurable increase in present or projected future happiness and generally painted a picture of sudden wealth as a negative experience. In one famous 1978 study published in the Journal of Personality and Social Psychology, lottery winners actually scored below accident victims who were partially or wholly paralyzed by their accidents in the pleasure of day-to-day events! A 1995 New York Times article on lottery winners observed that a “growing body of evidence suggests that winning big often brings big, if not ruinous, trouble.”

A Positive Experience

Unlike the previous studies, 76 percent of the participants in my study experienced the sudden acquisition of wealth as “positive” and another 10 percent viewed it as “neutral.” Only 14 percent of the participants experienced sudden wealth as “negative.” What accounts for the enormous statistical variation between my study and the earlier literature?

Participants in studies of sudden wealth – including mine – are self-selected; that is, they volunteer. The 14 percent of participants in my study who experienced a negative adaptation to sudden wealth were presented as helpless and unable to make decisions. Such passivity often leads to people taking advantage of them and making decisions for them. Being taken advantage of is cited by the popular media as a common negative experience of lottery winners. Since the lottery winners interviewed by the media had to agree to be interviewed for an article that would be widely read, it is possible that those who agreed to such publicity were seeking vindication for perceived wrongs and differed from those who declined to participate.

On the other hand, participants in my study were obtained through the assistance of legal and financial professionals working with suddenly wealthy clients. In view of the selection process, it would be inappropriate to generalize my findings as applicable to everyone experiencing sudden wealth. My findings are useful, however, for legal and financial professionals, since it provides a useful profile of many of the issues likely to face suddenly wealthy clients who seek professional financial or legal advice.


There was a significant relationship between early money messages and adaptation to sudden wealth. Eighty-eight percent of the participants rated “positive” were raised in households in which the childhood money messages were either “save/don’t spend,” “save” or “save/spend responsibly.” Sixty-seven percent of the participants rated “negative” did not receive these messages while growing up. Thankfully for most parents, there was not a significant correlation between early money behavior and adult money behavior! It appears that money messages received during childhood are more predictive of adult money behavior than is the child’s actual behavior with money while growing up.

Adaptive or non-adaptive behavior with sudden wealth also appears to correlate with marital status. Eighty-one percent of the participants rated “positive” or “neutral” were married, while 67 percent of the participants rated “negative” were single.

The most interesting data was derived from comments volunteered during interviews. Half of the participants spontaneously raised the issue of the impact of their wealth on their relationships with siblings. Ninety percent of the participants raising this issue viewed their wealth as the catalyst for negative relationships with siblings. Their experiences ranged in tone from somewhat annoying to extremely adverse. Participants reported sibling reactions ranging from jealousy to expectations of sharing in the wealth and a sense of being entitled to be supported.

Representative comments concerning sibling relationships included:

- Their behavior makes me not interested in having relationships with them.
- The tendencies people [my siblings] had were made clearer. That clarity made it painful and very obvious.
- My brother and I have reacted very differently to the money. He’s into the flash of it, the materialism, and that makes us further apart than before.
- Right now there is a breakdown in communication among us.
- My siblings and I have had a problem with it. We’re not as close as we used to be.
- My sister was always a jealous person. This just made it worse.
- One of my siblings wanted to split my check equally among all of us.
- I love being able to help my family and my siblings and bring some joy to their lives.

Positive Introspection

Introspection is another of the serendipitous findings arising from the study. Seventy-five percent of the participants rated Positive were introspective. Only 33 percent of the participants rated Negative were introspective. It is not surprising to find introspection exhibited by participants rated Positive. Introspection permits the recipient to “look inside,” to examine, to reflect about what the potentially vast change in wealth means in one’s life. It permits the recipient to examine his or her early money messages and money behaviors, to determine the relevancy of those messages and behaviors to the radically changed circumstances occasioned by adult acquisition of wealth and to begin, if necessary, the process of change or integration.

As Frankl postulated in Man’s Search for Meaning, when an individual’s search for meaning is successful, it not only brings him happiness but also the capacity to cope with adversity. Adaptation to stressful events is a process that continues over time. Introspection would appear to enhance the ability of recipients of sudden wealth to participate effectively in this process. This theoretical postulate appears to be borne out by the finding that 90 percent of the participants demonstrating introspection who have encountered problems with siblings as the result of the sudden acquisition of wealth have been able to cope effectively with those problems.

Representative comments concerning introspection made by participants during the course of the interviews included the following:

- It [sudden wealth] has given me a lot to think about. I’ve been very thoughtful.
- I’ve done a lot of exploring and thinking.
- I’ve thought about what it means to me at this time in my life.
- Wealth is a road to self-awareness. I’ve been grounding myself, getting comfortable with who I am.
- It has been a soul-searching time.
- The money feels somewhat like a burden. I need to do something that makes a difference. I’m not sure yet but I’ve been reflecting a lot, seeking a purpose.

The study also found a relationship between altruism (both donating to charity and helping family and friends) and positive adaptation to sudden wealth. Two-thirds of participants rated Positive cited the ability to donate to charity as a positive consequence and 75 percent rated the ability to help family and friends as positive. None of the participants rated Negative considered the ability to participate in charitable activities as a positive aspect of sudden wealth. Although some of the participants rated Negative initially viewed the ability to help family and friends as positive, all reported that the overall effect of helping others had turned out to be negative.

Finally, a wide disparity concerning children was found between the Positive and Negative participants. Ninety percent of the participants rated Positive either wanted to help their adult children or expressed concern about the effect of their money on young children. None of the participants rated Negative even mentioned their children during the interview process.

The involvement of all participants in legal and financial counseling leads to the hypothesis that positive adaptation to the sudden acquisition of wealth is related to appropriate financial and legal counseling. Recipients of newly acquired wealth who have a proactive relationship with their legal and financial advisors appear to have a substantially increased likelihood of experiencing such wealth as a positive factor in their lives.

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