Dave has been in a slump. His car has seen better days, to the point sometimes the Chipmunks have to push it, which they consider embarassing arriving in that manner to a soccer game. Unknown to the boys, Dave is suffering from financial problems as all the songs he recently composed were rejected. Dave loses the soccer game due to being distracted by his problems. He feels even lower in comparison to the father of the opposing team, who has been making big bucks and bought a sleek sports car which he gives the Chipmunks a ride home in. Dave's car conks out yet again and he has to push it himself. Finally arriving home, he realizes the tuition for the boys' summer camp, Camp Happy Trails, is coming due. Dave is forced to admit to the boys he cannot afford it, angering Alvin and upsetting Theodore (although Simon takes it in stride). Feeling he has let everyone down, Dave goes to bed that night depressed, remarking the world would be a better place without him. In a dream, Dave is visited by each Chipmunk individually to show how they would turn out if Dave never adopted them:
Simon's Timeline: Simon shows a future where he is 40 and still cannot get his elementary school certificate! This happened as he bombed out in a spelling bee. With Dave, together they prepared for the spelling bee with Dave coaching him to remember harder words. Simon is shown winning the spelling bee correctly spelling "Mississippi" with Dave in the audience remembering that was one of the words he coached Simon on.
Theodore's Timeline: Theodore shows a future where he lives on an island as a hermit, warning even shipwrecked sailors to stay away from him. This happened as Dave never taught him how to make friends and thus gain support to get elected to the student council.
Alvin's Timeline: Alvin shows a future where he is a put-upon low-level employee who must deal with an abusive boss. This happened as Alvin never learned how to be his own boss. When Alvin opened a lemonade stand, Dave was curious why he only had one cup for sale, to which a lethargic, discouraged Alvin comments one is all he expects to sell in a saturated market such as lemonade stands. Dave says that when going into business, one needs a positive attitude no matter what, as well as a concept to attract potential customers. Alvin takes Dave's advice and names his business "The Lemonade Stand of the Stars" becoming a hit.
With this knowledge, Dave wakes up and gets an idea for a song. Alvin remarks "Camp Happy Trails here we come" as the Chipmunks help him compose a song which is presumably accepted by a recording company.
- Their soccer nicknames were:
- Dave - "Big" Seville
- Alvin - "Speedy" Seville
- Simon - "Brainy" Seville
- Theodore - "Chubby" Seville
- The title and plot are based on the 1946 film It's a Wonderful Life.
- The episode is also known as It's A Wonderful Life, Dave.
- Simon's segment is a parody of The Twilight Zone and his appearance and delivery parody the series' creator/host Rod Serling.
- Part of the Alvin and the Chipmunks: It's a Wonderful Life, Dave VHS.
- Part of the A Chipmunk Christmas and Christmas With The Chipmunks DVDs.