Just one student? Sounds great! I think children really LEARN when the reward is the success of learning. With one on one teaching, a lot of the reward is getting alone time with an adult that cares. As a child makes progess, s/he reaps the reward of seeing that s/he can really read - then it becomes self-reinforcing. It's like playing an instrument - it's not too fun until it starts sounding good, and it doesn't sound good until you've practiced for a while.
I always give my students verbal permission to make mistakes while they are learning, you don't come to the lesson already knowing what to do, or there wouldn't be a need for the lesson. As long as the child is trying, mistakes are just part of the process. In my years of teaching, I have found that many children stall out because they believe they should already know how to do something and are afraid to make mistakes.
My 'rewards' are verbal. You have to be careful with verbal encouragements, making certain they are authentic and given after an actual accomplishment. Children see right through platitudes. After a breakthrough, I'll say something like, "Wow!", or "Just listen to you read!" looking the child right in the eye and with a big grin.
Have a wonderful time with your student :-)
Chris