Fees For Poor Grades - Winner Solution or Not?

Pay for good grades? No! Charge a fee for poor grades.

Ever heard of the concept of Loss Aversion? The concept of Loss Aversion comes from Amos Tversky and Daniel Kahneman. The concept states that the pain of losing something is double the joy of gaining that same thing. Confusing? Let me explain. If you find $100 on the sidewalk, you will be happy! If you then lose the $100, you feel worse than if you never found the $100 initially. I used this theory to encourage my son to make better grades.

We had tried paying him for good grades, but that seemed to have minimal effect, so I decided to try Loss Aversion. At the beginning of a grading quarter at school I gave him $200 cash. Here’s the discussion that ensued:

He asked, “What’s this?”

“This is yours to keep.”

“Really?” he asked.

I said, “Yes.”

A moment later he suspiciously asked, “What’s the catch?”

“You can spend all the money now, if you want. You probably won’t want to, though. Any time you bring home a C, you owe me $5. You bring home a D, you owe me $10. You bring home an F, you owe me $20.”

He didn’t like the idea at first (maybe he was already feeling the potential pain of giving some of the money back to me), but we agreed to the program. The first time he had to pay me $5 for a C, he told me to just take the $5 from the original $200 sitting on his dresser. I told him that he needed to hand me the $5. Why? Physically handing me the $5 has a stronger effect that watching me take $5 from the stack of bills. Just like paying in cash at a store is sometimes a little more painful than paying by credit card. Handing over the cash makes the transaction a little more real and a little more painful.

I don’t remember how much money he ended up keeping, but I do know that he did not enjoy having to pay me when he brought home a C or below. Was the experiment a success? I think so. The more a child is motivated by money, the more powerful the effect will be. I do remember his grades were better that quarter, and I also remember he did not want to participate in the experiment the next quarter. My wife told me that he eventually told her that being in charge of money was too stressful and that he would prefer if she kept the money and paid me when needed.