Nancy Drew, 18, and her friend Helen Corning are caught in a storm while boating on Twin Lakes. A floating log damages the boat, a wave knocks them out of the boat, and their boat sinks. Another boater on the lake, Laura Pendleton, hears their cries for help and rescues them.
The three girls row to a cove and then walk to a bungalow Laura had seen earlier. No one is there, but the second floor of the bungalow is sparsely furnished, and there is food in the corner pantry. As the girls dry off and warm up, Nancy and Helen tell Laura that they're on vacation for a week at the Pinecrest Motel. Laura shares that her father died several years ago, her mother died a month ago, and she is on her way to meet her guardians at Montewago Hotel. From there, she is supposed to live with her guardians in their home on Melrose Lake. Laura is worried, though, because the letter she got at boarding school didn't come across as warm and welcoming.
Back at their hotel, Nancy and Helen talk to the manager about the storm, and a woman interrupts. She asks if someone can change a flat tire for her. The manager and his staff aren't able to help; Nancy suggests the woman call an area gas station.
The next morning, Laura visits Nancy and Helen's room. She is anxious about staying with her new guardians. When she met the wet and frustrated Alma Dowd (posing as Laura's guardian Marian Aborn) the previous night, Alma blamed her for the inconvenient flat tire and Alma having to drive in the storm. Alma apologized for her behavior earlier that morning, though.
Laura is supposed to meet Stumpy Dowd, who is posing as Laura's guardian Jacob Aborn after lunch. The girls reassure Laura as best they can. Later in the day, Nancy and Helen stop at a real-estate office to find out who owns the bungalow. The realtor tells them that the couple who rented it only plan to be there on weekends. Nancy and Helen take a detour to drive past the bungalow on their way back to the hotel. A speeding black car, coming from the direction of the bungalow, narrowly misses their car.
Helen's Aunt Jane arrives at the hotel. She tells Nancy that the Drews' housekeeper, Hannah, has sprained her ankle. Nancy's father is out of town, so Nancy plans to return home.
Before Nancy leaves, she and Helen go to the Montewago Hotel to meet Laura's guardians. When they get there, Stumpy and Alma are about to check out. Laura leaves to get her mother's jewels out of the hotel safe. While Laura is gone, Stumpy tells Nancy and Helen that Laura is penniless. Helen suspects that the man driving the speeding car at the bungalow was Stumpy, but the girls do not find the car in the parking lot.
After Nancy drops off Helen at the hotel, she starts her drive home. A storm moves in, and a fallen tree blocks the road. Jim Donnell and his sister Cathy help Nancy move the tree. The Donnell family knows the real guardians, but Jim and Cathy didn't think the Aborns were at the house for the summer yet. When Nancy gives them a description of the couple she has met, the description appears to match.
Once at home, Nancy learns that her father wants her help with an embezzlement case. The next morning, Nancy and her father discuss the boating accident, Laura's story and his embezzlement case. Bonds and securities have been stolen from Monroe National Bank, even the branch in the Drew family's town, River Heights. The bank employees are already being investigated, however some of them are on vacation. Nancy's father gives her a list of people to find so she can give him her impression of them. Just as they finish talking, the phone rings. Nancy picks it up and hears a girl's voice. Before she can figure out who is on the other end of the line, the phone is hung up.
Nancy begins to visit with people on her list. They do not seem to have anything to do with the bank theft. Later, Nancy realizes the strange phone call may have been Laura. She tries to call her, but Laura's number has been disconnected.
Nancy calls Jim and Cathy. Cathy's family went to visit the Aborns, but their house was closed up. Cathy knew the phone had been disconnected and tells Nancy that milk delivery had also been stopped.
Nancy tries to visit with others on her list. One set of names on her list is Stumpy and Alma, who are not home. The woman who opens their door tells Nancy that Stumpy and Alma are actors.
Laura is at Nancy's house when she returns. Laura had tried to call Nancy, but when Alma saw her on the phone, she had twisted Laura's arm and hung up. Laura ran away after Stumpy and Alma locked her in her room twice, and she overheard them talk about getting her jewels. From there, Laura had barricaded herself in her room so she could slip out through her window.
Nancy, Hannah and Laura discuss calling the police but decide not to. After dinner, Nancy's father calls with an update. Detectives were tailing and watching some of the employees. Nancy's father concurs with their decision to not call the police.
The next morning, Nancy travels to Melrose Lake. She parks her car down the road from the Aborn house and sees a man, who looks like Laura's guardian, walking through the woods with something in his hand. She follows him, but he disappears. In the clearing there is a dilapidated shack.
Nancy stands on a box to look in a window, and Stumpy discovers her. He tells Nancy that Laura has run away; Nancy doesn't reveal what she knows. Next, she visits Jim and Cathy, but they aren't home. Nancy registers at the hotel and plans to look around later that night. Nancy lets Hannah know she is staying overnight and checks on Laura. She says that Stumpy has detectives looking for Laura and gets permission from Laura to enter the Aborn house without ringing the doorbell.
At the Aborn house that evening, no one is present, and it is locked. Nancy sneaks through Laura's window, and hides in the closet when she hears Stumpy and Alma return. After Stumpy searches the room for the jewels, he takes two suitcases out of the closet but doesn't see Nancy hiding there.
When she gets the chance, Nancy goes downstairs and hides behind the sofa. Stumpy and Alma enter the room. He opens a wall safe, takes out money and securities and packs them in a suitcase before going to bed. Nancy decides to go back to the shack before talking to police. Once inside, she finds a trap door and Laura's real guardian, Jacob Aborn. His wife, Marian, is in Florida taking care of her mother. Jacob learns that Stumpy and Alma have been impersonating him and his wife. He knows they have swindled people.
While Nancy and Jacob talk, Stumpy sneaks up and knocks Nancy unconscious. Then he re-chains Jacob. Nancy regains consciousness and remembers a hand-positioning technique that will help her get out of ropes. She uses it as Stumpy ties her hands and feet. He ties the rope to a wall hook while he tells the two prisoners of his escape plan. He also knows Laura is at Nancy's, and he has sold Jacob's car to pay for his black sports car.
After Stumpy leaves, Nancy works to get her hands loose. Jacob tells her the rest of the story. Monroe National Bank (the same bank in her dad's embezzlement case) is the executor of the Pendleton estate, and Laura is not penniless. Laura's mom had moved her securities to the bank vault when she became sick. Jacob and Marian had been out of the country when Laura's mom died. When Marian had to go to Florida, they arranged by letter for Laura to come to Melrose Lake. Laura never got the letter. Instead, Stumpy and Alma, impersonating Jacob and Marian, arranged for her to come earlier so they could steal the jewels.
Back at the Drew house, Laura, a family friend and Nancy's father return from a barbeque. Because they didn't hear from Nancy, they decide to go to Melrose Lake to find her. On the way, they talk about the cases. Laura tells them that the executor of her mother's estate is Monroe National Bank. Nancy's dad explains that a background check on Stumpy and Alma revealed a criminal record — including theft, embezzlement and prison time — but the police had been unable to find them. Laura asks if Nancy's father has a picture and identifies Stumpy and Alma as the people she knows as her guardians.
At the shack, Nancy and Jacob escape and walk to the Aborns' house because Jacob doesn't think Stumpy or Alma will be there anymore. They sneak in. Then the doorbell rings, and Jacob faints. It is Jim and Cathy with their parents. Marian had called them earlier in the day, concerned because she hadn't been able to reach Jacob. Nancy explains what has happened and asks Jim to call police. Soon after, Nancy's father, the family friend, Laura and a state trooper arrive.
Nancy tells everything to her father. She thinks the connection between the two cases is the Pendleton estate and suspects that Laura's mom's securities never made it into the bank vault. She also knows where Stumpy and Alma might be hiding.
Nancy, her father and their family friend drive to the bungalow. They can't get too close because there is a construction sign. They park and walk toward the bungalow. They see a man with a fishing pole and tackle box walking down the beach and hear him greet a boat passenger. They also see a light in the second story of the bungalow window. The three decide to split up to search the perimeter. Soon after, Nancy finds her father on the ground. He was hit from behind.
Once her father is back to himself, the trio sees people running toward the road and hears a car starting. They give chase to the vehicle and catch it on a tight curve, but the car goes over the cliff. They go down into the ravine to help. Stumpy and Alma are still in the car, and the third passenger is on the ground. They pull Stumpy and Alma out of the car and retrieve the suitcases.
The car explodes, and an ambulance and police arrive. First aid is given to Stumpy, Alma and the other man. Nancy's father identifies the other man as William Frednich, who was the bank president's assistant. The police open the suitcases. They are filled with clothing, toiletries and wigs. When Nancy suggests there might be a hidden compartment, the police discover the missing money and securities. The value is assessed, and Nancy's father is given a receipt. The criminals are taken into custody, and later a fourth accomplice is caught — Alma's brother, Joe Jackson, who worked at the bank in the vault department. The case is solved, and before long, Laura meets her real guardians and likes them.