How to add entity reference to custom entity

I've created two custom entities and need to create a one to many reference between them. What I would like to achieve is to have the Child entity with field Parent that would reference the Parent entity. On the other hand, the Parent entity should have field with collection of Children entities.

The Entity reference module seems like the obvious choice, but how do I use it strictly from code to reference my custom entities in the way I described?

I also thought of just using Entity's API Entity::setUp() to load the references. This solutions seems simpler but what is the best Drupalish approach?

Both entities are fieldable.