Sudden Wealth Syndrome is real

In the 1990s, Stephen Goldbart, a psychologist at the MMC Institute in San Francisco, studied the impacts of sudden wealth on entrepreneurs during Silicon Valley’s gold rush. As a result of their surging net worths and radically changed lifestyles, Goldbart’s subjects exhibited signs of paranoia, excessive guilt and insomnia, while also expressing fear of losing control.

To describe the various stress-related disorders infecting the newly rich, Goldbart coined the term Sudden Wealth Syndrome, or SWS. But it’s not reserved for tech billionaires. It can afflict anyone whose life is suddenly altered by a dramatic increase in wealth, says Stanley Tepner, portfolio manager and first vice president at CIBC Wood Gundy in Toronto.

“The most common [examples] tend to be either a divorce settlement or an inheritance, but you also have insurance settlements and sales of businesses and properties,” Tepner says.

Tepner’s been interested in the negative connotations of financial windfalls for two decades. He says there are three areas where the suddenly rich tend to be blindsided by their newfound burdens.

Grow Your Savings Effortlessly with Moka

Automate your savings with every purchase and watch your money multiply. Moka rounds up your transactions and invests the spare change. Start building wealth effortlessly today. Join thousands of Canadians embracing financial freedom with Moka

Sign up now

1. What to do with the money

Ironically, a sudden infusion of cash can get in the way of sound financial planning. People can have radically different reactions. Some will throw money at every investment that grabs their attention. Others may be paralyzed by the opportunities new wealth opens up for them.

Just because someone is now wealthy does not mean they know anything about managing money, Tepner explains, or that they’re wealthy enough to withstand a string of poor investment decisions.

A woman who’s just sold a successful towing company, for example, may have known everything about building her business. But having to now manage money, rather than people and equipment, can put her completely out of her element.

“Some are too careful,” Tepner says. “Some, on the other hand, are too flippant … and don’t realize this may be the only meaningful, dramatic increase in net worth they’ll experience in their lifetime.”

A life-changing windfall cannot take the place of a detailed personal financial plan, which should take four factors into account: your earnings, your financial needs, your goals and your risk tolerance.

2. How to manage your emotions

Coming into a lot of money can trigger many emotions, from the heart-stopping joy of a lottery win to the mixture of sadness, guilt and gratitude that can accompany an inheritance. When those emotions fuzz someone’s financial logic, Tepner says problems can arise.

He gives the example of a client who put all the money from a considerable inheritance into GICs that earned next to nothing in interest, rather than placing it in investments that could potentially generate healthier returns. The client didn’t want to risk a penny of what her now-departed parents had worked all their lives to accumulate.

While the client saw her approach as a form of tribute to her mother and father, Tepner says, “It’s almost like a second tombstone” that prevented her from turning their life savings into something more.

Other situations, like a death or divorce, can see a family’s money manager removed from the picture, forcing a less experienced partner into a financial decision-maker role for which they’re not prepared.

“A lot can go wrong there in terms of investing,” Tepner says. “The risk is whether you can manage your own emotions well enough to handle that money in the best possible way for yourself.”

Unexpected vet bills don’t have to break the bank

Life with pets is unpredictable, but there are ways to prepare for the unexpected.

Fetch Insurance offers coverage for treatment of accidents, illnesses, prescriptions drugs, emergency care and more.

Plus, their optional wellness plan covers things like routine vet trips, grooming and training costs, if you want to give your pet the all-star treatment while you protect your bank account.

Get A Quote

3. How wealth affects your relationships

We’re all familiar with the cliche of a newly wealthy person’s friends suddenly looking for handouts. As much as that sounds like a TV trope, Tepner says it’s real, adding the corrosive effect on personal relationships can be the most upsetting aspect of sudden wealth.

It’s also the most difficult one to prepare for: Having your lifelong friends treat you differently because of your suddenly bountiful bank account. While you’ll probably be comfortable picking up the cheque when you first come into money, it will likely get old if you’re still expected to do that years later.

“Count on being barraged by the phone calls, emails, mail and door knocking of perfect strangers who have their own designs for the new money,” Tepner says. “We hear a lot about ‘the distant cousin who needs help.’”

Tepner’s advice, whether it’s dealing with opportunistic hangers-on or deciding how best to invest your newfound wealth, is to not make sudden decisions.

Don’t splurge on the biggest yacht at the boat show or make a down payment on a $3 million house. Take the time to deal with the flood of emotions you’re bound to feel and then move forward, carefully and with a road map in place.

More: Bill C-208: Tax relief for passing business to children


Trade Smarter, Today

With CIBC Investor's Edge, kick-start your portfolio with 100 free trades and up to $4,500 cash back.

Clayton Jarvis is a mortgage reporter at Prior to joining the team, Clay wrote for and edited a variety of real estate publications, including Canadian Real Estate Wealth, Real Estate Professional, Mortgage Broker News, Canadian Mortgage Professional, and Mortgage Professional America.

Explore the latest articles

Can you pay the CRA with a credit card?

Can you pay your taxes using a credit card? Yes, but that doesn’t mean you should. Here’s what to consider before swiping for the taxman

Leanne Armstrong Contributor


The content provided on is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.