I can't figure out how to paginate my categories.php. I have this special loop. I have to have it done this way. I am returning three posts and need to get the pagination working to display the rest of the posts

    Here is the full loop
       $paged = ( get_query_var( 'paged' ) ) ? get_query_var( 'paged' ) : 1;
      //get the child categories and only display 3 posts
$allcats = get_categories(array('child_of' => get_query_var('cat'), 'number' => 3,'order'=> 'asc', 'paged' =>     $paged)); 
   foreach ($allcats as $cat) : 
   $args = array(
    'category__in' => array($cat->term_id),
   );

   $customInCatQuery = new WP_Query($args); 

   if ($customInCatQuery->have_posts()) : 
   echo '<div class="menupageContent">';
       //this chunk of code gets the image attached to each child category
      $terms = apply_filters( 'taxonomy-images-get-terms', '' );
      if ( ! empty( $terms ) ) {
      foreach( (array) $terms as $term ) {
              if($term->term_id == $cat->term_id) {
                echo wp_get_attachment_image( $term->image_id, 'menu' );
              }
      }
      }
   //display the title of each child category
   echo '<h3>'.$cat->name.'</h3>';
   echo '<ul>';    
   //this loop gets all the posts assigned to each child category
   while ($customInCatQuery->have_posts()) : $customInCatQuery->the_post(); ?>

   <li><a href="<?php the_permalink(); ?>"><?php the_title(); ?></a></li>

    <?php
    endwhile; 
    echo '</ul></div><!--end menupageContent-->'; 

    ?>

   <?php else : 
    echo 'No post published in:'.$cat->name;                
    endif; 
    wp_reset_query();
    endforeach;