Prior linguistic knowledge is proposed to support the acquisition and consolidation of new words. Adults typically have larger vocabularies to support word learning than children, but the developing brain shows enhanced neural processes that are associated with offline memory consolidation. This study investigated contributions of prior knowledge to initial word acquisition and consolidation at different points in development, by teaching children and adults novel words (e.g., "ballow") that varied in the number of English word-form "neighbours" (e.g., "wallow, bellow"). Memory for the novel word-forms was tested immediately after training, the next day and 1 week later, to assess the time-course of prior knowledge contributions. Children aged 7-9 years (Experiments 1, 3) and adults (Experiment 2) recalled words with neighbours better than words without neighbours when tested immediately after training. However, a period of offline consolidation improved overall recall and reduced the influence of word-form neighbours on longer term memory. These offline consolidation benefits were larger in children than adults, supporting theories that children have a greater propensity for consolidating phonologically distinctive language information. Local knowledge of just a single word-form neighbour was enough to enhance learning, and this led to the individual differences in word recall that were related to adults' global vocabulary ability. The results support the proposal that the relative contributions of different learning mechanisms change across the lifespan, and highlight the importance of testing theoretical models of word learning in the context of development.