Nov. 6: How to avoid blowing an inheritance

November 6, 2025

We often read (or hear) about the fact that as our parents and grandparents age and pass away, there’s a phenomenal transfer of wealth from old to young underway, via inheritance.

But sadly, a lot of people who get an inheritance windfall blow it all within a couple of years. Save with SPP decided to probe into this issue a little more.

In an article posted on LinkedIn, financial author Jake Gaudet refers to getting an inheritance as “Sudden Wealth Syndrome.”

He reports that according to the National Endowment for Financial Education, “nearly 70 per cent of people who receive a large windfall lose it within just a few years.”

In exploring why this happens, Gaudet says he sees a pattern amongst those who burn through mom and dad’s cash.

There’s “performative generosity,” or “spending to earn love or loyalty,” he explains. There’s “unconscious rebellion,” or “overspending as a rejection of past deprivation.” Next is “shame-based discipline,” or “saving out of fear, not strategy.” Finally, there’s the “martyrdom mindset,” or “feeling obligated to fix everyone else’s struggle.”

The Ask the Money Coach blog explores the “why” of inheritance-blowing as well.

“One of the most significant dangers of receiving an inheritance is impulse spending. It’s tempting to splurge on luxury items or experiences that you’ve always wanted. You might think, `I deserve this after all I’ve been through,’ and while treating yourself isn’t inherently wrong, it’s essential to strike a balance,” the blog tells us.

Even those who decide to invest their inheritance need to be careful, the blog continues.

“Another common mistake people make with their inheritance is diving headfirst into high-risk investments. The allure of quick returns can be hard to resist, especially if you’re feeling confident after receiving a substantial sum of money. However, high-risk investments can lead to significant losses just as easily as they can lead to gains,” the blog explains, citing the risk of chasing a “hot stock” or “cryptocurrency.”

Other pitfalls include “lifestyle inflation,” where the sudden appearance of wealth in your bank account prompts you to “live beyond your means,” the blog reports. Other dangers include “a lack of financial planning” and “ignoring taxes and fees.”

The Finance Key blog notes that “70 per cent of inherited wealth disappears by the second generation, and 90 per cent by the third.”

“A survey by Ohio State University revealed that individuals typically save only half of their inheritance and spend or lose the rest,” the blog reports.

The blog suggests that the newly wealthy inheritors “embrace financial literacy,” as “understanding how money works is the first step in protecting it.”

A professional’s assistance, the blog continues, is also a wise step. “Working with a certified financial planner can provide structure and clarity when managing a large sum. These professionals help create sustainable spending plans, tax strategies, and diversified investments,” the blog asserts.

Be sure, the blog continues, to avoid “emotional spending.”

“Retail therapy or celebratory splurges may feel justified after a financial windfall, but they often lead to regret. A Credit Karma study found that 58 per cent of Gen Z and 52 per cent of millennials identify as emotional spenders, with many racking up debt because of it,” the blog tells us.

In addition to establishing “clear financial goals” for your inherited money, the blog suggests that you “implement a waiting period before major purchases,” particularly if you now have hundreds of thousands of dollars burning through your pocket.

“This pause gives time to assess whether a purchase fits long-term goals or stems from emotion. It also allows for comparison shopping, consultation with advisors, or even discovering better alternatives. Building this habit fosters more intentional, value-driven spending,” the blog adds.

The blog concludes by suggesting a diversified investment portfolio (repeating the idea of avoiding putting your inheritance eggs in a high-risk basket) and thinking long-term.

“Inheritances represent more than just money—they often carry the hopes and sacrifices of previous generations. Reflecting on this deeper meaning can help guide how the money is used. Aligning spending and investing decisions with personal values creates a more fulfilling financial journey,” the blog states.

A definite take-away from these articles is that you need to think before you spend – a slow and steady approach may be the most successful.

Slow and steady also works if you are saving for retirement, as does starting young. If you’re saving on your own for retirement and aren’t sure how to build a diversified portfolio, perhaps the Saskatchewan Pension Plan may be of assistance. Any Canadian with registered retirement savings plan (RRSP) room can join.

You decide how much to contribute – and you can also consolidate other RRSPs within your SPP account.

SPP does the rest – we invest your savings in a professionally managed, diversified and pooled fund that operates at a low cost. Over time, and with contributions and transfers from you, your balance grows, and at retirement, your choices include a monthly annuity payment that you can’t outlive or the more flexible Variable Benefit.

Check out SPP today!

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Ask the Money Coach, Finance Key, LinkedIn

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