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Pay for Play or Let Them Play?

Week of April 11, 2019

Pay for Play or Let Them Play

When Liza comes home with an A in English would you pay her $20? How about if she finally cleared the 3-meter mark in her final attempt in the pole vault at regionals? Paying kids for performance can be a challenging subject. Some parents think it is motivating and replicates the real world. Other parents claim it rewards the wrong habits, can be demotivating, and even “robs children of their childhood.”

As mentioned in past newsletters, we are documenting interviews with parents to understand their financial journey and experiences teaching family values and financials. In the earliest interviews, one of the stock questions we asked was “Do you or would you pay your child for performance – like getting a good grade in school?” In the first set of interviews, the answer was universally, “No, and I do not believe in paying for performance.” The answers were so consistent that we thought we had captured the Zeitgeist. We went so far as to stop asking that particular question in later interviews.

But, recently, in less formal discussions, we have met a handful of parents (and grandparents) that do pay for performance both for academic and athletic results. We have since added the question back into the interviews and thought we would review the research, best practices, and arguments for and against paying for performance.

If you pay, reward behaviors, not results

Rewarding children for grades is not a new idea, but it appears to be increasing in popularity -- 36% more Millennials and Gen-Xers say that they have been paid for grades in comparison to older generations. Unfortunately, useful research and data on behavioral outcomes is hard to come by. News articles on paying children for performance tend to simplify relevant research results (e.g., “it works” or “it does not work”), rather than revealing the underlying nuances and study biases that impact outcomes. And, much of the reporting is colored by political perspectives about the primacy of economic incentives, individual responsibility, and the role of government.

The most comprehensive studies into incentives for children come from government or school-based programs rather than those in the home. However, there are some key detailed results that can help to inform decisions for families.

Researchers from Northwestern looked at an incentive-based summer reading program and found that the kids that read more already liked reading, and "to the extent that incentives are effective, they may not effectively target the students whose behavior they are intended to change."

Uri Gneezy, a professor well known for a broad range of work in behavioral economics, reports in a wide ranging study of incentives, that very simple action-based reward programs work best. As an aside, Gneezy also reports that rewards that incentivize parents’ behaviors rather than children’s are some of the more effective.

One of the most quoted studies irrespective of how one falls on the issue, is one by Robert Fryer from Harvard. He reports on the fundamental challenge with incenting children for performance--Fryer writes, "Despite showing that students were excited about the incentive programs, the qualitative data also demonstrate that students had little idea about how to translate their enthusiasm into tangible steps designed to increase their achievement."

Unsurprisingly, paying for performance shares much of the same challenges with creating incentive programs in other contexts such as society writ large or employee bases. Unfortunately, children come equipped with far fewer tools to navigate or take advantage of such incentive programs. Many children do not understand the basic building blocks of educational accomplishment including time management, textbook review, and asking a teacher for help.

So, without passing judgment on the practice, what do we suggest? Rewarding and incentivizing -- and just plain praising -- the underlying actions and behaviors that lead to good results. If you would like to see your child reach the next academic rung, work with him to create a study schedule. If your kid wants to break the school record for the 1500m, work with her to create a training schedule. If you do not know what the building blocks of accomplishment are, do not expect your child to either.

What we found interesting

529 plan in Mr. Rogers' neighborhood

It is never too early to start thinking about saving for your kid’s college. The PBS program Daniel Tiger’s Neighborhood is now being sponsored by a 529 plan. Daniel Tiger’s Neighborhood is an animated reboot of one of Fred Roger’s most lovable characters as the admirable goal of engaging two- to four-year olds with “imagination, creativity and music, Daniel and his friends learn the key social skills necessary for school and for life.”

More plans to reduce student debt than presidential candidates

The student debt crisis will join immigration, women’s rights, and climate change as one of the big topics for the 2020 presidential election. The plans to tackle student debt are far ranging, but all of us voters need to understand the underlying issues and how student debt is treated far differently than other types of debt.

A journey of a thousand steps…

We are suckers for programs that prime college savings accounts (or actually any savings account) with small dollar amount to encourage additional savings and new behaviors. Pennsylvania will put $100 into a 529 for every newborn or adopted child. The website quotes research from Washington University that shows newborns with college savings accounts are three-times more likely to continue education after high school.

Financial Wellness starts with the basics

Till engages you and your children in a "learning by doing" roadmap