Adaptive memories are formed in the face of a fundamental tension: extracting commonalities across experiences to generate novel inferences (i.e., generalization), while simultaneously forming separate representations of similar events (i.e., memory specificity). Theoretical memory models suggest that specific experiences are initially encoded as hippocampus-dependent episodic memories and slowly become amenable to generalization through consolidation. Post-learning sleep facilitates such consolidation processes. However, generalization can also occur rapidly during wakefulness. Contemporary models propose that rapid generalization relies on the retrieval of specific episodes. In a sample of 141 four- to eight-year-old children, we investigated whether (i) age differentially relates to generalization and memory specificity, (ii) generalization is contingent on different aspects of past experiences, and (iii) the effect of a sleep-filled delay on generalization and memory specificity differs across age. We found age-related differences in generalization and memory specificity, with improvements with age being more pronounced in generalization than in memory specificity. Unlike prior evidence in adults, children’s generalization success was contingent on retrieving specific object conceptual properties and on inter-object semantic proximity, but not on perceptual attributes or surrounding contexts. Further, older children were more likely to retain general and specific aspects of memory after an overnight delay. However, age-related gains differed across memory functions: Compared to younger children, older children showed greater gains in generalized, but not in specific memories. These findings reveal those aspects of past experiences upon which children draw when creating inferences, and suggest that the effects of sleep on generalization and memory specificity interact with age.