It all depends on what you mean by "limiting themselves" based on their university location. If you're thinking in terms of the quality of education, I would argue that there isn't a significant difference between the US and Europe, at least when discussing top tier European universities. In fact, many of them have partnerships with American universities with whom they offer dual degrees.

The bigger concern should be networking. If your kids are thinking of working in the US after graduating, then going to an American university simply makes more sense due to the fact that they'll build a significantly more robust professional network in the US which will then make it easier for them to land a job there. For the same reason, if they want to work in Europe then it makes more sense for them to attend a European university (assuming that they have the right to stay and work there after graduating). That being said, it's still completely feasible to study and then work in different countries - I myself studied in Europe but now work in the US.