First, I should note that I’m speculating without any basis at all here: I don’t have kids nor have I had any relevant formal training. It’s entirely possible this is a wrong approach or simply too nuanced for their ages.

I’d try to frame test as purely information-gathering. There should be neither penalties for low grades nor accolades for high grades (those are for dangerous things and showing initiative). Instead, use the grades to adjust study strategies- are their high grades because of a natural affinity or spending too much time on the subject? Are their low grades from not putting in enough time/effort, not understanding the fundamentals, not finding interest in the subject, etc.