Do You Pay Kids for Good Grades?

I recently wrote a column on things you should never tell your children about money. During the research, I asked parents to email me their strategies for raising money-smart kids. One parent wrote: “We told the kids from kindergarten on that their job was school. Parents get reviews and bonuses for a job well done – kids get report cards and pay for grades.”

But a plethora of studies show that big financial rewards, such as mega-bonuses, don’t improve performance. Consider a study conducted by Duke University psychology professor Dan Ariely and several colleagues. They had participants perform six different tasks that required creativity, concentration, memory and problem-solving skills. They varied the amount of financial bonuses participants could receive if they performed well, and measured the effects that different incentive levels had on performance.

The researchers wanted to offer a meaningful reward, so they conducted the experiment in India, where the average person’s monthly spending is $11. Participants were offered the opportunity to earn a small bonus, equal to one day of their regular pay; a medium bonus equal to two weeks’ pay; or a huge bonus equal to five months’ pay. In each case, the better participants performed, the more money they stood to make. (They knew going in exactly what amount was at stake.)

Result: Those who stood to earn the most money performed the worst. Relative to people in the small or medium bonus categories, those offered a huge bonus achieved “good” or “very good” scores less than one-third of the time. As Ariely writes, “The experience was so stressful to those in the very-large-bonus condition that they choked under the pressure.”


Researchers performed an alternate version of the experiment, giving the participants the money upfront and telling them they could keep some or all of it depending on how they performed. It didn’t work very well: The first participant, who was given the equivalent of about five months’ salary, performed poorly – and then ran away with the money. The researcher in charge didn’t have the heart to chase him.

I don’t give my kids money for good grades, but we do celebrate, sometimes with material rewards. Last spring, when one of my daughters brought home a stellar report card, we bought a few things for her room that she had her eye on – an updated comforter for her bed and a new desk and chair. (We had been using a folding table and chair and needed to upgrade her workspace anyway; she picked the desk she wanted from a catalog.) But most of the time, they get praise and a hug for a good report. (Fortunately, all three are doing well, so it’s not like one kid gets the booty and the others are left out. In the past we have also focused on improvement from semester to semester.)

California psychotherapist Kate Levinson, author of the new book Emotional Currency: A Woman’s Guide to Building a Healthy Relationship with Money, says she doesn’t like the idea of paying kids for grades. “You want learning to be associated most strongly with curiosity, the pleasure of learning itself, and wanting to do things with a sense of competency in the world,” she explains. “Money is really good for some things but it’s not great at motivating us to want to learn and to be engaged with our lives.”

Levinson suggests it’s better to tie great academic performance to some kind of experience. For example, younger kids could get to pick a fun weekend activity like flying new kites, visiting a favorite museum or seeing a play.


“So much in our world is tied to money — it’s suffocating for us as adults and for kids,” Levinson says. “They are advertised to all the time. Our culture gives them enough associations that somehow having money makes someone a better person. Part of our role as parents is to help them have a sense of themselves and a sense of well-being in the world that is not tied to money.”


Do you pay for grades? Why or why not?

Laura Rowley