James Dillingham Young and his wife Della are a young couple who are very much in love with each other, but can barely afford their one-room apartment due to their very bad economic situation. For Christmas, Della decides to buy Jim a chain which costs twenty-one dollars for his prized pocket watch given to him by his father. To raise the funds, she has her long hair cut off and sold to make a wig. Meanwhile, Jim decides to sell his watch to buy Della a beautiful set of combs made out of tortoise shell for her lovely, knee-length brown hair. Although each is disappointed to find the gift they chose rendered useless, each is pleased with the gift they received, because it represents their love for one another.