At first glance, the passage does seem to suggest that innocent children are punished for the sins of their fathers. But notice that the passage you quoted does not say “innocent children.” Rather, it says that God punishes those who hate Him, but shows mercy to those who love Him and keep His commandments. God punishes the children for the sins of their parents only when the children follow their parents’ sinful ways.

There was a time during the tragic history of Israel that the people believed their trials and tribulations were due to the sins of their forefathers. But, through the prophet Ezekiel, God told the people they were in error.

God said, “Yet you say, ‘Why should the son not bear the guilt of the father?’ Because the son has done what is lawful and right, and has kept all My statutes and observed them, he shall surely live. The soul [the individual] who sins shall die. The son shall not bear the guilt of the father, nor the father bear the guilt of the son. The righteousness of the righteous shall be upon himself, and the wickedness of the wicked shall be upon himself. But if a wicked man turns from all his sins which he has committed, keeps all My statutes, and does what is lawful and right, he shall surely live; he shall not die. None of the transgressions which he has committed shall be remembered against him…” (Ezekiel 18:19–21).

If the children of the third and fourth generations (Exodus 20:4) turn from the sinful ways they learned from their parents, and begin to love God and keep His commandments, God will be merciful to them. Anytime an evil person turns to God in wholehearted repentance, God will mercifully pardon him—no matter how sinful his parents may have been.