Financial Liabilities: Borrowing remains subdued

The debate about the financial burden demographic change will impose on younger generations is often strikingly one-sided. Much attention is rightly paid to the rising cost of public pensions, health and long-term care systems as populations age. But there is another side to the intergenerational balance sheet that receives far less attention: over the coming decades, younger generations will also inherit an exceptionally large stock of private wealth that has been accumulated by today’s older generations.

In the USA, households close to or already in retirement held around 86% of total gross financial assets and 80% of net financial assets⁵ in 2025. Total net financial assets of the 55–64 and 70+ age groups amounted to around EUR80trn, equivalent to 305% of US GDP. Including real estate and durable consumer goods, their total net assets reached around EUR109trn. The wealthiest age group was the 55–69 cohort, with gross financial assets of EUR49.2trn and real estate and durable consumer goods worth EUR16.6trn. This was followed by households aged 70 and older, whose combined financial and real assets amounted EUR49.6trn (Figure 18).

For Germany, the financial wealth of households aged 55 and older can only be estimated approximately on the basis of household surveys. According to the latest Panel on Household Finances (PHF) survey, published by the Bundesbank⁶, mean gross wealth reached around EUR114,400 for households whose reference person was aged 55–64, EUR98,200 for those aged 65–74 and EUR107,900 for those aged 75 and older. The comparatively lower figure for the 65–74 age group may partly reflect the weaker labor-market experience of cohorts born between 1950 and 1958, who were exposed to high unemployment and subdued real wage growth during important parts of their working lives. Combining these wealth estimates with the number of households in each age group reported in the Mikrozensus⁷, we estimate that the cohorts aged 55 and older hold around 60% of the private households’ gross financial assets, which would correspond to around EUR 6.1trn in 2025 (see Figure 19).

Including real estate, average household net wealth in Germany stood at EUR324,000 in 2023, slightly above the euro-area average of EUR312,000⁸. Wealth peaked among households whose reference person was aged 55–64, at EUR440,100 on average. It remained high among those aged 65–74, at EUR411,400, but was lower among households aged 75 and older at EUR343,700.By contrast, households headed by someone aged 16–34 held average net wealth of just EUR106,900.

These differences largely reflect the typical lifecycle of wealth accumulation. Households build up assets during their working lives and, on average, begin to draw them down in retirement. The same pattern can be observed across most EU countries, although the pace of decumulation in old age differs markedly depending on the generosity and financing structure of public pension systems (Figure 20).

These figures should nevertheless be interpreted with caution. Household wealth surveys tend to understate financial assets, while the very wealthiest households are often underrepresented. In Germany, for example, the PHF survey puts average gross financial assets at EUR87,400 per household, compared with EUR117,890 based on the aggregate household balance sheet. Survey-based estimates of future inheritances should therefore be regarded as indicative rather than precise.

Moreover, the wealth that younger generations may inherit over the coming decades represents an upper bound rather than a guaranteed transfer. Wealth is distributed very unevenly: in Germany, the richest 10% own 53.7% of total net wealth⁹. DIW estimates suggest that around EUR400bn is inherited or gifted each year, with roughly half of these transfers accruing to the wealthiest 10% of beneficiaries¹⁰. At the same time, rising health and long-term care costs, together with less generous pension systems, are likely to absorb a growing share of household wealth before it can be transferred. The coming inheritance wave will therefore be substantial, but highly uneven, and could reinforce existing wealth inequalities within younger generations.

The same applies in the US. Consider a single retiree who wants to withdraw an average of EUR2,000 per month to cover living, health and care costs. Assuming average inflation of 3.0%, an annual return of 5.0% and a retirement period of 17.4 years – the average remaining life expectancy of a 70-year-old woman according to the latest UN population statistics – the required savings at age 70 would amount to around EUR368,700. This is equivalent to roughly 46% of the calculated average net wealth of EUR802,800 for the 70+ age group. A substantial share of accumulated wealth therefore needs to remain available to finance retirement itself rather than being passed on.

Combined with the highly unequal distribution of US household wealth, this helps explain why estimates of the “Great Wealth Transfer” vary so widely, from around USD36trn to more than USD100trn over the coming decades.¹¹ Headline asset stocks therefore provide only a rough indication of the wealth that will ultimately be transferred to younger generations.

Nevertheless, the broader conclusion remains: the intergenerational debate should consider both sides of the ledger. Younger generations will face rising public-sector burdens as societies age, but they will also receive one of the largest private wealth transfers in history. Neither offsets the other. But discussing future pension, health and long-term care liabilities without considering the parallel transfer of private assets gives an incomplete picture of the economic relationship between generations.

The global household-debt ratio fell to 60.9% of GDP in 2025, almost 10pps below its 2005 level and nearly 13pps below its 2009 peak (Figure 22). This does not mean that households stopped borrowing: liabilities continued to increase, but more slowly than nominal economic output. Nevertheless, the contrast with the public sector is striking. While government debt has continued to rise, households have spent much of the past decade strengthening their balance sheets.

But deleveraging was far from universal. Since 2005, the debt ratio has fallen by 20.4pps in North America and by 6.3pps in Western Europe, while Japan’s ratio has remained broadly stable. Australia and New Zealand stand apart from this trend: their combined ratio rose by 12.2pps to 113.8%, although it remains below its 2020 peak. The decline in the global ratio therefore conceals a significant shift in the geography of household debt, from the traditional advanced economies towards emerging markets, albeit with important exceptions.

China recorded by far the largest increase. Its household-debt ratio rose by 42.1pps to 59.4% of GDP between 2005 and 2025, reflecting the extraordinary credit and property boom of the intervening years. However, the ratio has barely changed since 2020, underlining how abruptly that boom has ended. China’s household-debt ratio is now only around 10pps below that of the US, but the two countries have followed opposite paths: American households have deleveraged substantially, while China has moved from rapid debt accumulation to balance-sheet caution.

Elsewhere in the emerging world, the increase was less dramatic. Since 2005, the household-debt ratio has risen by 10.7pps in Latin America to 27.8% and by 6.1pps in Eastern Europe to 21.8%. Both remain moderate by international standards. Asia excluding Japan and China also appears relatively stable, with its aggregate ratio rising by only 2.2pps to 55.1%. But this regional average is deceptive. It partly reflects the growing weight of poorer, less-indebted economies and substantial deleveraging in Singapore, where the ratio fell by 26.4pps to 51.6%.

At the country level, the fault lines cut across the advanced and emerging-market divide. Switzerland and Australia recorded debt ratios of 125.1% and 119.4% of GDP, respectively, while Canada stood at 103.3% and the Netherlands at 97.2%. Several Asian economies also carry substantial household-debt burdens: Taiwan and South Korea recorded ratios of around 92%, while Thailand and Malaysia stood at approximately 87% and 85%, respectively. These levels are comparable with those recorded in several Western economies before the global financial crisis. In 2006, household debt stood at 98.4% of GDP in the US, 84.2% in Spain and 95.0% in Ireland. High leverage does not in itself signal an imminent crisis, but it makes households and consumption more vulnerable to income, interest-rate and housing-market shocks. The decisive dividing line is therefore not between advanced and emerging markets, but between housing and financial systems that rely heavily on household leverage and those that do not.

Strong asset growth and subdued borrowing pushed global net financial assets (financial assets minus liabilities) up by +10.1% in 2025, broadly matching the previous year’s +10.2%. They reached a record EUR211.5trn, almost twice their 2015 level and more than tripling their value in 2005.

China recorded the strongest increase in net financial wealth at +15.3%, reflecting the combination of strong asset growth and the near-standstill in household debt. Latin America followed at +11.3%, while Eastern Europe and Asia excluding China and Japan both recorded growth of +11.0%. North America and Australia and New Zealand also achieved double-digit increases of +10.4% each. Japan recorded a strong +7.4%, while Western Europe again brought up the rear at +5.2%. Growth exceeded its 20-year average in almost every region (Figure 22). Latin America was the only exception, although its +11.3% increase was broadly in line with its long-term rate.

The figures reveal a less visible source of wealth creation. Weak credit growth may constrain housing activity and household investment, but it also strengthens private balance sheets when financial assets continue to expand. In 2025, this deleveraging dividend lifted global net financial wealth faster than gross financial wealth. It also reinforced North America’s dominant position: the region held 51.3% of global net financial assets, compared with 48.1% of gross financial assets. Low leverage relative to its enormous asset base gives North America an additional wealth advantage.

Adjusted for population growth and inflation, China remains the undisputed long-term leader (Figure 23). Real net financial assets per capita have increased more than sevenfold over the past two decades. No other region comes close. Even the other emerging-market regions recorded little more than a doubling. Among advanced markets, Western Europe continued to lag behind Japan, highlighting how weak asset growth, rather than debt accumulation, has constrained European wealth creation.

Comparing gross and net financial assets adds another dimension. In China, net financial assets grew around 0.7pps more slowly per year than gross financial assets over the past two decades, reflecting the rapid accumulation of household debt. A smaller gap is also visible in Eastern Europe. However, this is not a universal emerging-market pattern: in Latin America and the rest of Asia, gross and net wealth developed at broadly similar rates. In the advanced economies, the relationship is reversed. As household debt generally grew more slowly than assets, net financial wealth outpaced gross wealth. The difference was particularly pronounced in North America, where net financial assets grew around 0.7pps faster per year.

Examining the 25 richest countries by net financial assets per capita at the end of 2025 reveals how significantly debt can alter the ranking (Figure 24). Most notably, the US ranks ahead of Switzerland to claim first place. Although Switzerland remains ahead in gross financial assets, its household liabilities of around EUR130,080 per capita are more than twice the US figure of EUR52,730.

Taiwan and Sweden exchange fifth and sixth places. Australia falls from eighth place in the gross ranking to eleventh in the net ranking, while Ireland slips from 14th to 15th, the UK from 15th to 18th and Norway from 12th to 22nd. By contrast, Germany rises from 13th to 12th, Italy from 16th to 13th, Japan from 18th to 14th and Spain from 22nd to 21st. The Netherlands remains ninth in both rankings. The comparison makes clear that gross wealth tells only half the story: what ultimately matters is how much remains after debt.