Sudden Wealth Syndrome (SWS): Definition, Causes, and Treatment

What Is Sudden Wealth Syndrome?

Sudden wealth syndrome (SWS) is a type of distress that afflicts individuals who suddenly come into large sums of money. Becoming suddenly wealthy can cause people to make decisions they might not have otherwise made. Sudden wealth syndrome symptoms include feeling isolated from former friends, feeling guilty about their good fortune, and extreme fear of losing their money.

Understanding Sudden Wealth Syndrome (SWS)

Sudden wealth syndrome is not an actual psychological diagnosis. It was originally coined by therapists who work patients who have become suddenly wealthy. Individuals with Sudden Wealth Syndrome may have acquired their wealth through a lottery win, become rich trading cryptocurrency like bitcoin, or received a large inheritance. Many people afflicted with Sudden Wealth Syndrome deal with an identity crisis because they transition from surviving on a meager weekly, fortnightly, or monthly salary to becoming a wealthy and privileged individual.

Key Takeaways

  • Sudden Wealth Syndrome (SDS) refers to a psychological condition or an identity crisis in individuals who have become suddenly wealthy.
  • Sudden Wealth Syndrome is characterized by isolation from former friends, guilt over their change in circumstances, and extreme fear of losing their money.
  • Individuals can avoid Sudden Wealth Syndrome by planning ahead to ensure that their wealth is spent wisely, avoiding making quick decisions about how to spend their money, and maintaining discretion about their sudden influx of money.

How to Avoid Sudden Wealth Syndrome

Plan Ahead

Although it is not possible to prepare for every type of financial windfall, situations such as inheritances can be planned out ahead of time. High-net-worth parents should organize family meetings with their adult children to discuss how they would like their wealth distributed when they die. Pre-planning can help resolve areas of potential conflict. For example, wealthy parents might inform their children that they have established a trust for each child that can only be accessed once both parents have died.

Don't Make Quick Decisions

It can be tempting for individuals to go on an immediate spending spree upon receiving news of an imminent financial windfall. Instead, it's prudent to place the money in an insured savings account at a bank or custodian until the individual has established a comprehensive financial plan. Individuals should asses their long-term life goals and look at how their newfound wealth can be used to help reach these goals. For instance, a young family that won the lottery may decide to use a portion of the winnings to set up a college fund for each of their children.

Keep the Windfall Discreet

The details of a financial windfall should be kept discreet to stop friends, family, and work colleagues from getting jealous or greedy. Once people become aware that an individual has come into a considerable sum of money, they may treat that person differently or ask for a handout or loan. Individuals can have full confidence in discussing their new financial situation with a financial planner because finance professionals cannot disclose customer details to a third party.

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