In Chicago, you really ought to be able to manage on $250k. There are nice houses in just about any neighborhood you want to live in on sale for less than $600k. That's $3000/mo monthly payments, plus say $15k of taxes, for $50k/y of housing costs. Food is, say, $20k, and transport another $10k. So you have $80k spent on necessities. If we assume a 40% average tax rate and an income of exactly $250k, you have $70k/y of slack. (To be clear, I understand people have other expenses, but I also think $600k is a pretty generous housing allowance in Chicago. However, the parents in question inexplicably spent $1.2M.)

Sure, it'll be expensive to send four kids to private school . . . so, don't do that? Or pay only part and use loans for the rest? But in reality the financial situation is probably even rosier than this, but they're probably squandering the money.