This paper provides a link between incomplete markets and human capital accumulation under standard risk aversion conditions. We present an overlapping generations model in the presence of income risk, incomplete markets and altruism, and study how altruistic individuals respond to the uncertainties by buying incomplete social insurance (or making social security arrangements) and providing a kind of family insurance for their children by investing human capital in them. This paper provides a unique explanation for why incentives are so important in promoting economic growth. It is shown that countries with larger dispersion of uninsurable risks end up with higher steady-state human capital stock and consequently with greater income.