Interestingly, there has been research showing that excessive praise (of the general, "you're great" kind) actually is associated with giving up earlier and not trying ones best (see Nurture Shock). I also recommend to How to Talk so Kids will Listen. The idea is to be descriptive, "You did it! You built the tower!", "I see blue circles, can you tell me about this?", "You climbed to the top by yourself!" Do NOT judge. Another book put it this way: Your description should be like a photograph. If you are adding any judgements, then it could not be captured by a photograph. You can also give positive for the process rather than just the outcome, "you kept trying and did not give up", "you gave it your best effort," "you kept putting the blocks on the top even though it was frustrating".
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So, you don't want to say, "you're great" or "I like what you did," because with "you're great," they don't know what specific actions make them "great," and with "I like what you did," they start to believe they need to please people, rather than owning it themselves. Just be descriptive and enthusiastic. Also, you can say things like, "you did x. That was considerate (kind, helpful, etc.)" Then, they get an idea of categorizing behaviors.
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