One of the best ways to redirect problem behavior, to create an orderly classroom and win the cooperation of your students is to build a "Token Economy." Through the token economy, your students earn points, tickets or play money to purchase or win rewards.
Your rewards can be tangibles, like toys, pencils, stickers or candy; or your rewards can be privileges like free time, free time on the computer, the use of CD or MP3 players with favorite musicians, lunch with the teacher in the classroom or other things your students will put a high value on.
Each kind of token system has it's own pluses and minuses, and can be used to support different aspects of your program.
A point system should include some way to hand out points and a way to record how many are accumulated. With older or higher functioning students, you can have a student be "the banker," and record the points every day. I like poker chips and use them to support skip counting. Whites were 2 points, and were given randomly to recognize good behavior. Blues were 5 and were given for completed assignments, completed homework, coming to class prepared. Reds were 10 points.
With a point system, the points can be used to "purchase" a prize from the prize box. I also found that older students like to "rent" a portable CD player with earphones (you can get them for less than $20 at a discount store) to listen to a favorite CD while they are working on assignments. I made tickets with 5 half hours that I would punch like a railroad ticket.
I purchased my poker chips at a discount store, both in plastic and clay. The kids really like the tactile experience of handling the clay chips. One disadvantage is kids will steal them. I used a chip system with great success in an inner city middle school, but would find chips all over the building.
A ticket system will include a drawing at the end of the week from the tickets in a box or jar. Your kids will quickly learn that the more tickets they have earned, the more likely they will be chosen for a prize. A ticket system is a great way to support appropriate behavior-carry some in your pocket at all times, and hand them out randomly for appropriate behavior, but NAME the behavior: i.e. "That's for being ready to get to work, with your pencil and folder out," or "That was a really good answer." (Don't just give it for "the right" answer, but answers that reflect thought.) Your students will quickly learn that they will get a ticket for getting to the reading group table quietly, or for getting their folder out and started quickly.
Dollar stores are great places to get prizes, as are online party supply companies. I found a great painted chest at an import store that is my "treasure chest" which adds a little excitement to winning.
For my ticket system, I like to use the red or blue tickets that are sold for drinks at festivals or for rides at carnivals. You can also make your own, but be sure in either case you control access to your tickets. Have the children put their names on them with pen immediately, and collect them at the end of their pull out period, or several times a day.
A negative for a ticket system is that children may sell each other tickets, or steal other children's tickets. You may also have a child who gets lots of tickets and never wins.
Finally, you could use a money system. You can make copies of coin worksheets on colored paper, cut them out and give the coins as rewards. It will also support teaching money: when I used a money system in a second grade, I found that all my kids could count money by the end of the year. Everyone wanted to know how much money they had, and those who didn't know how to count money would grab a student who was good at counting money to coach them.
Designate what the kids get prizes for, and pay more for more difficult things. Say, $.25 for bringing in their homework, $.50 to each person in the quietest group in Math, or say $.75 for someone who acts as the banker.
For rewards, you can let students make purchases from your box as you do with a point system. I have also found that an auction works well: your hardest working students with the most points and will be most likely to get their first choices. I also find it's a way to eliminate a lot of the "cash" flowing through the room, and the students with less paper money can save for the next auction.
A token economy has an added value: the most points, or tickets or money will have status value for your class. Students quickly learn who has the most and who has the least number of tickets, points or money, and they quickly learn that their ability to win prizes has to do with how well they comply with the class rules and the teachers' values.