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Skippy is the rambunctious son of stern Dr. Herbert Skinner and his wife Ellen. As a health official, Skinner wants to get rid of Shantytown, because he believes it to be a health and sociological menace. He strictly forbids Skippy to play there, but Skippy continues to go across the tracks. One day while playing in Shantytown with his buddy Sidney, Skippy protects a new boy, Sooky, from bully Harley Nubbins, after which Sooky and Skippy become fast friends. When Harley accidentally breaks the windshield of his father's car with Skippy's yo-yo, he blames it on Skippy and Sooky. Enraged, Mr. Nubbins demands that they pay him for the damages. Later, Mr. Nubbins catches Sooky's pet dog and impounds it. The boys gather three dollars by breaking Skippy's savings bank, but Mr. Nubbins accepts it only for his windshield and gives them three days to come up with another three dollars to pay for a dog license. Sooky and Skippy spend the next two days selling bottles, lemonade and wood, and staging a performance to earn money. Skippy tries to borrow the remaining thirty cents from his father, but his father refuses to lend him any money. Still thirty cents short, the boys ask Nubbins for a continuance, but he tells them the dog has already been shot and killed. Devastated, Sooky seeks consolation from his mother. Angry with his father, Skippy refuses to confide in him and abstains from dinner. The next morning, Skippy finds a new bicycle from his father awaiting him on his doorstep. He trades the bicycle with his friend, Eloise, for her new dog and takes the dog to Sooky. Having a change of heart, Dr. Skinner buys Sooky a licensed dog, finds his mother a job, and refrains from ordering Shantytown destroyed, instead offering assistance to its citizens. For the first time, Dr. Skinner plays with Skippy in Shantytown and accidentally breaks Mr. Nubbins' new windshield. Dr. Skinner wins a fight against Mr. Nubbins, proving his worthiness to Skippy.