I start of with one Sim from the onset, and then grow the family from there. At most I have two generations in the house at once, which can get up to 4-6 Sims. If I feel like the house is too crowded, I'll have the oldest generation move out so I can focus on the current.
I also tend to focus on one Sim per generation as my "main character", but I am guilty of playing favorites with spouses that marry into the family, or other family members NOT elected as my main character. I once moved in an illegitimate offspring from the last generation's main character and she ended up being one of my favorites and a foil of sorts for the current generation main