A lady's allowance of money for her own personal expenditure. Long after the invention of pins, in the fourteenth century, the maker was allowed to sell them in open shop only on January 1st and 2nd. It was then that the court ladies and city dames flocked to the depôts to buy them, having been first provided with money by their husbands. When pins became cheap and common, the ladies spent their allowances on other fancies, but the term pin money remained in vogue.
It is quite an error to suppose that pins were invented in the reign of Francois I., and introduced into England by Catherine Howard, the fifth wife of Henry VIII. In 1347, just 200 years before the death of Francois, 12,000 pins were delivered from the royal wardrobe for the use of the Princess Joan, and in 1400 (more than a century before Francois ascended the throne) the Duchess of Orleans purchased of Jehan le Breconnier, espirglier, of Paris, several thousand long and short pins, besides 500 de la facon d' Angleterre. So that pins were not only manufactured in England, but were of high repute even in the reign of Henry IV. of England (1399-1413).
Source: Dictionary of Phrase and Fable, E. Cobham Brewer, 1894
More on Pin Money from Fact Monster: