I have the final answer on whether or not you should pay your kids for grades:
There's a great deal of debate out there among parents about how to motivate kids to do well in school. I think kids should do what they are able to do in school. A lot of parents have their eyeballs set on the brass ring - the "A" - when they have B or C students. If a B or C student is working his or her butt off and gets the B or C that they're capable of getting, then that's a huge success. It's the process and the activity of studying that should be valued over the result.
I'll tell you why that works. The more enjoyment and satisfaction you get out of a process, the better it feels. For example, when I'm shooting pool, I go through a five-point process just like the pros do (although I'll never be a pro), and when I do it right, it feels so good that I don't even care about pocketing the ball - that's just icing on the cake. If you're only focused on the end result, your hand tightens up, your arm twitches, and your head moves. Sure you may get lucky and inconsistently pocket some balls, but you'll never get past a certain level. But if you follow the process, eventually you'll be pocketing a lot more balls. It took me a couple of years to get to the point where the process was the goal and not pocketing the ball.
The same goes for kids in school. It's about the process and the learning that are important, not getting the grade.
One fun way to inspire your kids is to sit around the dinner table and ask them what they learned at school. My kid is currently taking some philosophy and political science classes, and on the nights he comes over for dinner from his place, we all sit around and enthusiastically discuss whatever he's learned that day or week. No matter what your child's age, you can still ask them to teach you something they learned at school. Once you've asked, just sit there, look impressed, enthusiastically ask questions, and complement them on their ability to discourse in a particular subject and show you that they've learned something. That kid is going to have a lot more enthusiasm for learning because the payoff is your interest and pride in them.
You have to decide what you want to achieve with you child. Do you want them to get good grades because you need them to get good grades, or are you trying to change their attitude and behavior? You are a lot better off trying to help them improve their habits than beating them up over a grade because they'll not only get the most out of their education, but they'll also learn how to be more focused and productive.
Another reason not to pay your kid for grades is that a lot of what we do on this planet isn't necessarily attached to rewards, especially financial ones (e.g. you don't get filthy rich volunteering for a charity). Providing praise and recognition when your child does well in school is wonderful, but setting expectations for a cash reward won't motivate your kid or instill the values you're looking for. It's difficult for kids to recognize that working hard has long-term benefits when all they are focused on is a paycheck.
So, you need to stress the process over the result, support their work ethic by demonstrating it yourself, and always value the activity of learning. If your kid comes home and he or she didn't quite attain a particular grade but you saw that they really studied and prepared, do not say, "Go to your room and don't play with your friends for six years." Tell them, "You know what? You really studied hard, and this one test in no way measures how hard you worked or how proud I am of what you put into this."