Completely agree. The littering is a no go for me.

But the idea that the bag is some reward and that you can lose some of it if you miss-behave and then maybe earn it back. That's reasonable.

I typically employ a progressive punishment in the form of a timeout. Go to your room for 5 minutes. If they don't respect that, it's 10 minutes up to 15 minutes. Culminating in: no iPad for you today.

Sometimes I ask them what the consequences for breaking the rules should be. And I get very reasonable suggestions.