Like it or not we are all human beings. We often like to see the world as a perfect place, and ourselves as perfect. But that is unfortunately not the reality. Our psyches are influenced by so many factors that it can be difficult for us to really know why we do things. Are we helping the poor man because we are sincerely generous, or because we feel better about ourselves when we help him? Is it for the honor of seeing our name on a hospital that we donate, or is it because we are principled people? The honest answer is that it is extremely rare for a human being to do something that is completely motivated by noble motivations. The Rambam (Commentary to Mishna Makkos Ch. 3) writes that if one does such a pure mitzvah, with no other "kavvanos" other than sincere desire to do the right thing, he is guaranteed a place in the world to come! He notes that the greatest Rabbis of the gemara were concerned that they might not have a place in the world to come, despite their many great deeds. One pure deed is not easy to come by.
We do not do the good things that we do only out of sincerity. That is certainly the main motivator for most of us who are trying to be good people, but it is the sad reality of human nature that we are motivated by other concerns as well. "Not to worry!" say our sages! We can serve Hashem with our Yetzer Hara as well! "A person should always [LiOlam] study Torah and perform Mitzvos even in an insincere way, because out of insincerity, sincerity comes." The gemara tells us that a person should always learn "shelo lishma" insincerely. But surely once a person is already studying "lishma" (sincerely) he no longer needs to continue studying shelo lishma! But the concept is a clear one. We are humans. There will always be a part of us that can use a little motivation! There is always a part of us that will be a little more careful. For example, a kind generous woman who devotes her time to raising her children, and caring for them, will make a delicious supper on time for her family in good spirits knowing that she is doing a great mitzvah. But should a man come over to that woman and offer her $50,000 to make a timely delicious supper [as she always does] for her family the following night, she will certainly be even more certain that her supper is ready a bit earlier than usual. As human beings, there is always a little more that we can be doing, and the Torah tells us that the way to get there is to start by doing it "Shelo lishma."
It is when we can honestly realize this is a part of ourselves that we can then relate to our children. Our children have so much good in them. But they do not naturally want to say please and thank you. When we applaud their good deeds, and tell them how proud we are when they are kind, they learn to be kind. This is primarily because they crave our approval. When a child receives something as an incentive, he is simply learning how to grow the human way. We all do things for incentives.
There are many parents who worry that if they offer their children money to learn and daven, [as Rambam (Commentary to Mishna Sanhedrin 10:1) suggests that one do] those children will begin to think that money is the greatest value that there is. In defense of the Rambam, I have found this not to be the case. A parent who give his child a small allowance each week and no more, and then approaches his child and tells him "if you learn Torah with me on Friday nights, I will give you extra money each week that you learn with me," has actually taught his child a powerful lesson. He is saying, "You know that you don't just get money from me for no reason. We work hard for our money, and don't throw it around for nothing. But if it would help you learn Torah, I would give all my money away. Tov li toras picha mealfei zahav vachesef."
Even that child who will do the good deed without an incentive will learn how much his parents value his good deed when they do give him the incentive. A friend of mine once told me of one of his proudest childhood memories. He was when he was in elementary school and had worked particularly hard to earn a good grade in a shiur that was challenging for him. When he came home with his mark, his father wordlessly took him into his study and unlocked his safe. He took out a watch from the safe, and presented it to his son. That boy felt great with his good grade, but he knew how his father's heart felt toward him whenever he looked at that watch. And to this day, his voice cracks when he tells the story.
It is certainly unwise to simply make everything dependant on incentives, for without room to grow, one will not do so. When we make everything an incentive, it also cheapens the experience. And of course, if the incentive is too expensive [giving a child a new biycycle every time she makes her bed,] then it grows absurd and impractical. [Whereas giving her a sticker on a chart, and taking her for ice cream every couple of weeks until she outgrows the need for that incentive would not be that impractical.] But when a child is challenged with something and given anything from candy to a sticker to a sports car, they are learning how to be great the Torah way. We are aware of who we are. We know that the Torah is the sweetest thing in the world. But we still put a little bit of honey on the letters when we first get there.