Tee shirts should be a mid- to high-level accomplishment reward, given the cost of producing them.
Reward the behavior you want to encourage with more of the same. With this in mind, do not reward exercise with junk food and/or tv time. Think in terms of giving rewards that foster and/or encourage more of the same behavior, but at a deeper level (i.e. for achieving a certain measure of success in swim classes, offer an additional private lesson next time they pay for a block of classes; for aerobics classes, give them an iTunes card, so they can buy more dance music for future classes; for weight training, give them gloves, so their hands are protected as they graduate up to heavier weights).
Those are expensive gifts to be handed out to higher achievers, but public accolade is inexpensive and highly effective for beginners. If you have a newbie who finally completes x activity at the basic level, everyone in the group gives them group applause/hugs/whatever. Make the group recognition a ritual, so that the newbie has a particular goal with a particular anticipated recognition time to shine on his/her own. Do not applaud groups of kids for reaching the milestone (unless you are acknowledging the performance and success of a group activity that involves team work). Each has to be singled out for special time to be given solo time to shine before the group.