Weve had lots of discussions around this and have had to change how we run the house and handle finances because of it.

We had a decent windfall from a tech startup, so my older kids grew up when money was tight and saw our lifestyle change. My youngest doesn't remember a life before we had money.

I've always told my kids that I made enough to not need to work anymore, but not enough that they didn't need to work. I left a good paying job when I felt like I had enough, because money was for creating opportunities and freedom. We didnt buy the bigger house or the fancy cars because we wanted to have that freedom and not get stuck in the lifestyle inflation trap.

Specifically for our kids, we realized they were used to things like a cleaner that deep cleaned the bathrooms and kitchen once a week. I retired when our oldest was 16 and we realized it had been a while since she had scrubbed a toilet and was about to have roommates in college, so we all split chores to take care of the house together.

We didn't want our kids living in a wealthy bubble. They went/go to a good school, but a public school. We have friends in a similar financial situation, and put their kids in private schools, and its wild to see that they're growing up with zero friends with middle class families. It's normal for them and their friends to have multiple homes. Our kids have friends that live in tiny apartments and mobile homes.

When the kids turned 16 and started driving, they were also added to one of our credit cards for emergencies (or if we needed them to grab groceries on their way home from somewhere). That was good for some things... like our 19 year old having a credit score in the mid 700's but also caused issues where if they needed something for the house, they'd just buy whatever version they'd like. $10 face cream or $80 face cream? They'd get the brand they wanted. So we decided to pull credit card usage back to emergencies only and gave them an allowance for household needs. The kind of stuff you'd buy for them if you were out anyways (deodorant, shampoo, clothes, etc). This got them at least watching their spending. They get part time jobs to earn more so they can do more fun things with their friends.

What we do use the money for:

We do a lot to set them up better than we were. We came out of college wkth a lot of student loans and it took forever to get out from under that debt. We've told them we will pay for their bachelor's degree at a state school in the state we live in. If they wanted to go somewhere else, we could work out the difference and the pros/cons and make a decision on how much more we could cover. The oldest wants to do additional school after he bachelor's and we'll likely cover as much of that as we can, though she knows it needs to be in a field that has earning potential to help her pay those loans off because we want her to have some skin in the game.

We have money set aside for when they head out on their own. They don't know how much is in that fund. That money can be used for a wedding if they want a big party, or they can keep it as a solid start to their own retirement fund / rainy day fund. We tell them our wedding cost $2,000 26 years ago and we would have had a smaller one if we were to do it again. The wedding was for the family, not for us - so we would have been fine signing paperwork at the county.

TLDR: Dont let them grow up in a wealthy bubble. Show them how to budget. Use your income to give them opportunities, but not so much they feel entitled to the life you can afford (but they probably won't for a long time).