Content to stay on at Rose Cottage, with her Aunt's Hetty & Olivia, Sara makes friends with Jasper Dale, 'The Awkward Man' of Avonlea. In the meantime, the school board has decided to hold a 'magic lantern' show and use the proceeds for the school library fund. The man they hire to do this show is in actuality a confidence man, who Sara inadvertently helps skip town with the money. Sara wants to put on a show to replace the missing funds and asks the help of the shy Jasper, who is an inventor and owns a 'magic lantern'. Sara gives a heartfelt recitation of ""The Little Match Girl"", and she is forever known as ""The Story Girl"", in Avonlea.

"Old Lady Lloyd" is believed to be a very wealthy woman, but she is actually living in poverty in her mansion. Sara befriends Miss Lloyd and wants to help her. Sylvia Gray, a friend of Olivia's visiting Avonlea, is the daughter of Miss Lloyd's former beau, who Miss Lloyd has never forgiven. Young Miss Gray has a magnificent singing voice, and Miss Lloyd, after a long conversation with Peg Bowen, walks through a thunder storm to get her cousin, with whom she has not spoken in years, to finance the young woman's career. The lesson is about forgiveness.