Is punishment a good money motivator?

The carrot or the stick? It’s an age old question. What gets the best results – rewards for success or punishments for failure?

Originally, it was more of a literal question. What makes a pack animal, like a mule, work harder? Dangling a carrot just out of reach, or whacking it repeatedly on the backside with a stick?

In reality, though not quite so literal, all motivation is derived in some way from either the search for reward or the fear of punishment. Even intrinsic motivations – the things we seemingly do for ourselves alone – are rooted in the desire for positive outcome or the fear negative ones.

By and large, most of us, when able, choose the carrot – not just for ourselves, but for others. Have you ever trained a dog? Most dog training falls into one of two camps. You can punish the dog when they do something bad, in the hope that they won’t ever want to do that bad thing again for fear of being punished. Or you can reward and praise the dog when they make positive choices, connecting good behavior with positive stimulus. In the one case all of their future actions are motivated by fear of mistake, and in the other their actions are motivated by their desire to please and be rewarded.

When thinking about our personal goals, especially our money goals, we tend to pick the carrot. But what about the stick? Is there a place for self-inflicted punishment in your goals? is a social/personal achievement site that puts punishment front and center. You set goals and then set your stakes. If you reach your goals, great! If you fail, though, it’s going to cost you.

It’s an interesting idea. When we set goals we usually envision ourselves making a commitment to achieve something. StickK more or less makes those vague commitments much more concrete and enforceable. Rather than simply setting a goal, you agree to a “Commitment Contract.” Your goals stop being optional. Where once you could just quit on a goal whenever you wanted, now there are consequences.

Numerous studies have shown the effectiveness of incentives on goosing productivity in the workforce (up to a certain point). People tend to work harder when there is a very clear and immediate connection between their effort and how they are rewarded (or punished) for that effort. Personal goals, however, are difficult to incentivize. How exactly do you reward yourself for saving $100 every month? That’s where punishment seems to fill the void. It may be difficult to reward yourself for success, but it’s pretty easy to punish yourself for failure.

In most situations, the carrot seems to trump the stick. In places where there is no carrot, however, the stick might just work. What do you think? Would having real consequences for failure help you achieve your personal goals?

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

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