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