The story begins the day before Christmas with a young woman named Della sitting at home counting her savings. The home she lives in with her husband, Jim, is a cheap, furnished rental apartment. When they first moved in Jim was earning more money, but the couple has fallen on hard times and now live in poverty. Della has been putting money aside after buying groceries for many months. She is sad and anxious because despite her efforts, she has not saved enough money. She had been hoping to buy Jim something special for Christmas with her savings. Della begins to cry on her couch as she realizes she does not have enough money to buy Jim a Christmas present.

After she stops crying, Della cleans up her face and looks out the window lost in thought. She suddenly catches a glimpse of herself in the dingy mirror on the wall and gets an idea. She lets down her long brown hair and looks at it for a little while. Della’s hair, notable for its beauty, is her prized possession. She puts on her old coat and hat and visits a shop that buys and sells hair. The shopkeeper, Madame Sofronie, agrees to cut and buy Della’s hair. Della spends the rest of the day going around the city looking for the perfect gift for Jim. His prized possession is a gold pocket watch that has been passed down through his family. She wants to buy him a nice chain to go with it, something special and rare. Eventually, she finds the perfect platinum chain. It costs all the money she got from selling her hair, plus most of her savings. Della goes home feeling very excited to give Jim his present.   

When Della gets home, she tries to style her new haircut as best she can. She worries that Jim will be angry and will no longer think she is pretty. When Jim sees Della has cut her hair, he gets a strange look on his face. Not knowing what it means, Della goes to him and quickly explains that she sold her hair to buy him a Christmas present. In response, Jim hugs her and tells her he loves her no matter what her hair looks like. He then gives her a Christmas present: a set of jeweled tortoiseshell combs she’d once admired in a shop window. Della loves the present, but she bursts into tears when she realizes she is unable to use Jim’s thoughtful gift. As Jim comforts her, she reassures him her hair will grow back quickly. She then excitedly gives him the platinum watch chain. Jim laughs and reveals he sold his prized watch to pay for the combs. The narrator concludes the story by praising the couple for their selfless gifts of love, calling them even wiser than the three wise magi who brought gifts to the baby Jesus on the first Christmas Eve.

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