Louella is a young nanny from the New England countryside who moves in with the Austins in the suburbs to care for their two children, Robbie and Cynthia. Beginning on her first day on the job, she enthralls the children with gruesome folktales. A month into her employment, Louella receives a letter from her mother back home, who tells her that Charlie Ryder, one of their neighbors, passed away. Louella is sad about missing the funeral. Shortly after this, Robbie begins having nightmares. Louella easily calms him down, but Mrs. Austin is worried that Louella may be threatening or scaring him. Louella insists that this is normal for a boy of Robbie's age. Louella takes the children to the train station one day, and then into town. While walking along the street, they see a man changing a mannequin in the window. It's missing limb reminds Robbie of Louella's stories, and he gets frightened. That night, he has a much worse nightmare that causes him to sleepwalk. It takes Louella and Mr. and Mrs. Austin combined to wake him up and calm him down. Mr. Austin is suspicious of Louella, but Mrs. Austin says that suspicion won't help. Meanwhile, Louella has been having her own odd dreams, seeing Charlie Ryder around the house. One night, while she is awake, she hears a knock on her door: Mr. Austin has fallen sick. They have to get a doctor to treat his pneumonia, which leaves Mr. Austin bedridden for several days. Louella, thinking about Charlie Ryder, suspects that his spirit might be haunting the family. She gets out two coins that the Ryders had paid her long ago — which she had hoped to put on Charlie's eyes at his funeral — and carries them with her to Mr. Austin's room, where she finds him sleeping soundly. Mrs. Austin and the nurse say that he's getting better. Louella leaves the two pennies on a dresser.