They don't have to be able to reach all the way around you, in my opinion. If they can lock those thumbs into your belt loops, or hold your belt if you wear one, then they are ready to begin. Start out with short trips, you will quickly find out if they are ready. Pay close attention, if they start getting quiet, they may be drowsy. If I feel mine starting to loosen up, I reach down and put my hand over one of theirs. They know, without me saying, that it means they need to hold on a little bit tighter.
Took my oldest today to the dealer, I knocked my jiffy stand spring off while riding my 6 and 8 year old on our long driveway. Made a wide turn around in a grassy field, and hit a damn 4x4 post. We looked for it, no dice. So off to the dealer we went. My 8 year old is still too small for the smallest DOT helmet at the dealer. So we bought a new spring, came home, swapped my 8 year old for the 6 year old, and went for a 20 mile ride out in the county.
Wouldn't trade it for anything. These memories can't be replaced, and the bonding is more important than any time they waste on video games or watching the tube.