Pay Kids for Good Grades? Bad Idea

Once you start down this slippery slope, you have to keep raising the stakes. Here's why it's better to pay a compliment than cash.

A plan by New York City's mayor Michael Bloomberg and schools chancellor Joel Klein to pay fourth- and seventh-graders for high test scores has prompted plenty of reaction.

In a tongue-in-cheek blog written by "NYC public school parents," the authors note that the kids are holding out for higher compensation. And a group of students calling themselves "Fifth- and Eighth-Graders for Fairness" are demanding retroactive pay for last year's tests.

In the Christian Science Monitor, one mother recounts a conversation between her 13-year-old son and his friends comparing rewards for their good report cards: a laptop for straight As, a cell phone, $10 per A. "What about high school and beyond?" frets Mom. "What would be left after the electric guitar, the portable DVD player and the iguana in the bedroom?"

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Although these comments are meant to be humorous, they highlight a couple of serious problems with paying kids for grades. Because once you start down this slippery slope, you have to keep raising the stakes. And once kids get old enough to earn their own money, you lose leverage.

Not to mention that this kind of deal doesn't always work. Child psychologist Sylvia Rimm points out that for high-achieving students, money doesn't matter. And, Rimm says, kids who are underachievers fail because they're inconsistent. So if they slip and get a poor grade, they figure that they're not going to get the reward and give up. Even worse, parents sometimes end up paying them for half measures and the system backfires.

In my experience, paying a compliment is better than paying cash. Reward good grades -- or consistent effort -- by giving your kids a hug, a word of encouragement, or a spontaneous treat -- anything but money. That way kids learn the personal satisfaction that comes with a job well done.

Sometimes money can be too powerful a motivator for parents to resist. But even then it seems to work best in small amounts and limited circumstances.

One dad I know came up with a set of financial incentives to reward his 11-year-old son for good study habits and improved grades even if the grades weren't As. But the boy was also motivated by a conscientious teacher and by his dad, who took an interest in his progress.

Maybe Mayor Bloomberg should take a lesson from the movies. In every film about kids overcoming odds to reach a goal (think To Sir, With Love, Stand and Deliver, Hoosiers, Coach Carter), the hero is either an inspirational teacher or a tough-as-nails coach who achieves success by holding the kids to a higher standard -- not by holding out a paycheck.

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Janet Bodnar

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.