George Jr. is living is up at Mr. Osborne's, who has decided that money is no object when it comes to his grandson. Mr. Osborne's hopes and dreams are to turn George Jr. into a titled gentleman.
George Jr. has clothes, a nice pony, his own servant, and a series of private tutors. As he learns from these tutors, he realizes how uneducated his grandfather actually is and starts to look down on him.
He's already had good practice in learning to lord it over others from the way Amelia raised him.
One day he buys a portrait of himself for his mother as a present. She is happy for weeks at this demonstration of affection. (She's got a pretty low threshold for what counts as being nice, right?)
At home George Jr. acts like a little grownup. He has grownup clothing, sits at dinner at the adult table, drinks his champagne (usually children would only drink a weak beer or rum-based drinks).
Mr. Osborne thinks this is delightful, though his old-men friends aren't really into having little George Jr. around being obnoxious during dinner.
Mr. Osborne also encourages George Jr. to fight other little boys, especially ones bigger and older than him. It's not really clear why, but it's probably a character-building exercise.
George Jr.'s footman takes him and his friends (over whom he also domineers) to plays and out to dinner afterwards.
Finally, George is old enough to go to school and is enrolled at Mr. Veal's academy.
Mr. Veal caters to rich clients and, unlike most schools, does not use corporal punishment. He is pompous and snobbish and proud of the long words he uses. He is awed by Mr. Osborn's money and treats George Jr. accordingly.
The reason Osborne is the way he is towards George Jr. is finally revealed, but it's not really all that shocking. George Jr. looks a lot like his father, and so for Mr. Osborne this is kind of a way to reconcile with the dead George.
George Jr. starts to really look down on his other grandfather, Mr. Sedley. Mr. Osborne is constantly running Mr. Sedley down as a bankrupt and a swindler, and George Jr. can't help but start thinking this way about him too.
Meanwhile, Mrs. Sedley dies. Amelia has been taking care of her in her illness, which has at least helped take her mind off George Jr.
His wife's death makes Mr. Sedley even more broken down.
One day, at Mr. Veal's school, there is a knock on the door and visitors are announced for Mr. Osborne. It's a tall, thin guy and a fat guy. Who could it be?
You guessed it – Major Dobbin and Jos! George Jr. recognizes Dobbin from his mother's stories about him.