Cash incentives for kids: do they really work?

While the concept of pocket money has been around for a long time, it has become increasingly popular for parents to pay their kids on a piece-work basis for everything from taking out the rubbish to getting good marks in school.

Unlike pocket money, performance-based rewards are designed to promote specific actions and reward particular outcomes.

For example, if your child takes out the rubbish, she gets a dollar. If she gets an “A” in chemistry, she gets $25. In many ways, it seems like a great way to get the best results while teaching the value of hard work.

Unfortunately, there may be some unintended consequences. If you take a deeper look at the way we persuade others to do the things that we want them to, you may notice that our interactions are governed by two very different sets of rules: market and social.

When we think of market-based transactions, we think of going to the shops and buying a product or hiring someone to complete a specific task like washing our car or fixing our teeth. Market-based transactions take place between individuals based on the value of the product or service.

Social transactions, on the other hand, place value on relationships rather than products or services.

While market-based transactions are settled with cash, social transactions are settled with an indefinite kind of social karma. We don’t pay for the room when we spend a night at our friend’s house.

We go to Christmas dinner at our in-laws without expecting to leave a tip. We help our neighbours fix a flat tyre without charging a fee. All of these tasks are handled free of charge as part of an unwritten social contract that defines our relationships.

While most transactions are clearly defined, there are a number of ambiguous actions that straddle the line between social and market transaction.

For example, you probably wouldn’t pay for advice you received from your brother-in-law or the family accountant, while you were having Christmas dinner. You might, however, feel like you should pay him if you went to his office for a consultation.

In the case of household chores, paying your kids for performance moves an activity from a social transaction to a market-based one.

If you decide that a dollar is a fair amount to pay a child for taking out the rubbish, you’ve taken the task from a community responsibility and created a market-based job. You’ve also put a structure in place for your child to demand payment for other tasks based on that relative scale. Now that you’ve paid a dollar for taking out the rubbish, how much are you going to pay for a more difficult or time consuming tasks like raking the leaves or mowing the lawn? How about visiting Grandma? How much is that worth?

Even if you decide to draw the line at paying for taking out the rubbish, your child will feel an inherent injustice if they are not receiving payment for something you want them to do and will be far less likely to pitch in and help.

The other significant issue with paying for performance is that once a payment system for chores has begun, there will inevitably be a long-term push for increased payment as the original dollar in incentive money becomes an entitlement. To get the same level of compliance, that original dollar could turn into two or three dollars in the course of a year.

Even though paying for each completed task can backfire, giving children monthly pocket money is a great idea. So is giving a child chores. Pocket money teaches the valuable lesson of delayed gratification, money management and budgeting. Chores teach practical life skills and build a sense of communal responsibility.

Unfortunately, paying your child to complete a specific task or achieve a specific result can change your home from a social setting with communal responsibilities to a market based economy where family members are employees.

While it may help you get things done around the house in the short-term, is this really how you would like to spend your time when you come home from work?

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