This is the cardinal mistake many parents make: They assume you can just tell kids how they are supposed to behave, and they will somehow extract the right lesson from your words and learn it.
In reality kids observe and learn from your behavior. That means the lesson here could as well be: "If you are the stronger one, you can make the rules. And the rules don't have to make sense and if you are in the right position you can break them yourself and be mean to others."
Which is ofc the polar opposite of what you sought to teach them. If you reason with your kids even of they are unreasonable, you teach them that reasoning is a good way of dealing with problems. If you explain to them why they are not allowed to do certain things you teach them there are reasons and they should be curious about the reasons behind the rules.
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.
I try to reward good behavior more so than I punish bad behavior. Things we're definitely simpler when they were younger but now they lie and make up stuff. I never lie or make stuff up. So, where does this behavior come from? And I never punish them for telling the truth.
I do agree that, as I read this and thought that there's some really nice advice in there this one struck me as slightly off putting.
I can only speak from experience with my own kids and while I try to encourage them and to be respectful there are situations when they need to learn what happens when you cross the line.
I'm not sure people turn out ok if they never experience painful moments and I'm not sure protecting our children from every repercussion is the best way. I'm undecided on this very topic and I certainly try to be positive and encouraging in every situation.