Grandpa thinks that Christmas is a magical time and everyone agrees. Mum is even trying to write a song about the Magic of Christmas. But Great Aunt Loretta declares that all this talk of 'magic' is silly. So Grandpa decides to use a bit of magic of his own to prove his point. Out comes the shrinking cap. While the family makes their usual Christmas Eve tour of Sunnysands, Grandpa puts his plans into action. He makes a wreath ting-a-ling; a pudding sing; and even flies through the sky on a miniature sleigh. But Loretta finds a logical explanation for all these outlandish events.

Finally Grandpa has to resort to the most magical thing of all - the fairy on top of the tree. Great Aunt Loretta gets sprinkled with a bit of Christmas Magic just in time for everyone to sing Mum's Christmas song.