And there will be small cuts to Working for Families, for households earning over $88,000 a year.
The child hardship package will cost $240 million a year when it is fully implemented and $790 million over the next four years.
Spokesperson for the Child Poverty Action Group, associate Professor Mike O'Brien, said the Budget signalled an important change in the approach to child poverty in New Zealand, as it recognised that the best way to help children in poverty was to give more income to low-income families.
"This increase recognises that families reliant on benefit income have fallen behind other households over many years.
Video: Budget 2015 - Public reaction
"Even a small increase in family income will make an enormous difference to the food on the table.
"We know that the increased money which goes to parents will be spent on their children, in both beneficiary households and those in paid work."
However, Mr O'Brien said there was concern that assistance families currently received would reduce the effect of the benefit increase.
Entitlements such as the accommodation supplement or supplementary hardship assistance, will erode the value of the benefit increase, and in real terms, $25 may become $10 to $15 for many families, he said.
"These families are likely to be in the poorest circumstances and will effectively remain in significant poverty."
"The changes to Working for Families impose more complexity on an already complex system and do not address the discrimination against children in beneficiary families whose parents cannot meet the required work expectations.
"[The group] is concerned that, in a challenging work environment, where many regions have high levels of unemployment, the increased work expectations will be difficult for many families and are not necessarily in the best interests of children."
He said the budget provisions were an important first step, but were only a first step.
English: Extra money will relieve some pressure
Speaking to Radio New Zealand this morning, Finance Minister Bill English said he expected the extra $25 a week would relieve some pressure for some families.
Mr English said he hoped families would spend the top-up on extra necessities.
"Of course there will still be some people who make poor decisions, but in households where there is children, the parents there have to focus on necessities because there simply isn't enough income to feed and cloth the kids, and waste a lot of money.
"We would think the bulk of it would be well used."
Mr English also said he believed expecting parents to return to work when their children turned 3 was in line with a significant proportion of families who weren't on benefits, and were in work.
"Being a parent is certainly an important job, we've seen a mix from a few years ago when the work test used to click in when the youngest child was 18.
"Then we moved it back to 5, and in this move it's gone to 3, that lines up with what happens for a significant proportion of families that aren't on benefits and who are in work.
"Quite a high proportion of women that have children are at work to some extent when the child is three and it maps pretty closely, or maps exactly to the entitlement for 20 hours free child care that begins at three."
