Jason Schneider

For many parents, paying children for getting A's in school seems like a great way to motivate them. Sometimes it works. But it's not always that simple.

Paying for A's can actually discourage some kids from working hard. It can create frustration and resentment among kids with siblings. In fact, if the ultimate goal is to encourage the character traits that will help children fulfill their potential throughout life, paying for A's can fail.

"It comes down to knowing the child and what they are working through," says Dan Keady, a certified financial planner and director of financial planning at financial-services firm TIAA-CREF.

Facts of Life

Almost half of parents pay kids at least $1 for getting an A, according to a July poll conducted for the American Institute of CPAs, a New York-based professional association. Among those who pay, the average reward for an A is more than $16.

"Paying for grades is one way to prepare them for adult life," says Mark DiGiovanni, a certified financial planner in Grayson, Ga.

"One of the big facts of adult life is that you do get paid for performing well," he says. "So this is a way of showing young people that when you do something well, you can get financially rewarded for it. And when you do something poorly, you don't."

But sometimes it gets complicated. One danger is that students will see the value in schoolwork only when there's a cash payout. "The downside of using money as a motivator is that it discourages true learning and changes the purpose for learning," says Neal Van Zutphen, a certified financial planner in Mesa, Ariz.

That's not just a philosophical issue; it has practical implications. Some students will quit trying to learn once they've earned a reward for reaching a specific goal, experts say. So the student who gets an A without too much effort might coast the rest of the way, never reaching his or her full potential.

For students who have a tougher time in school, paying for A's can have a similar effect. "If they don't get an A they can become discouraged," reducing their drive to achieve their personal best, Mr. Van Zutphen says.

Rather than reward grades with cash, Mr. Van Zutphen suggests that parents identify skills and character traits that can support long-term success: things like self-regulation, determination, curiosity, grit and resilience.

"Encourage them to develop these qualities that demonstrate that they will be able to continue to succeed," Mr. Van Zutphen says. That encouragement can include cash rewards, he says, but other powerful tools include verbal encouragement and praise for children's efforts as well as their accomplishments.

Family Matters

Rewarding effort, not just a specific grade, can be important in families with children who have varying academic abilities. A single standard of achievement for the family may discourage, or at least fail to motivate, kids whose siblings find it easier to get higher grades.

"It wouldn't seem fair for one child to be rewarded for marginal efforts, and the other child not to be rewarded at all," says Mr. DiGiovanni, the Georgia financial planner. "When dealing with children, you should strive to be equitable, which is not the same thing as being equal. This requires greater effort, but I think it can be worth it in the long run."

Deciding on goals that merit rewards can be a discussion between parents and children.

"The kids will many times set the bar higher than the parents would. Kids like to be challenged," according to Mr. DiGiovanni. "The persistence and discipline to get good grades are the real rewards, and they will carry those things throughout their life."

Money Talk

Frequency is another factor to consider. Offering cash every time kids ace a weekly quiz can quickly add up.

"The best number for each family is going to depend on that family's financial circumstances and the age of their children," says Clare Levison, a certified public accountant in Blacksburg, Va.

After financial rewards are doled out, parents have a role in helping the child figure out what will be done with the money. Does the child have total control over it? Should parents insist that some is saved?

One option is to put the money, or at least a portion of it, toward something for the child's benefit—maybe a car, a computer or savings for college. However parents choose to handle this, it's important to keep in mind that the ultimate goal is to encourage behavior that will serve children well for the rest of their lives.

"What will the money be used for? Will this be discretionary spending?" says Jordan Amin, a certified public accountant in Edison, N.J. "If little Johnny gets $10 every time he gets good grades and uses that to buy a new Xbox and there's no savings program put into place, how will that affect his future saving and spending habits?"

Ms. Mantell is a reporter for MarketWatch in Washington, D.C. She can be reached at ruth.mantell@dowjones.com.