I'd choose a good scope over the red-dot.
Most red dots have no magnification, and the dots are 4-5MOA...which means they cover an inch at 25yds--not the best in terms of accuracy. Great for quick target acquisition, though.
It'll be easier to pick out squirrels, and get accurate shot at longer distances with a good scope.
Most of my scope handguns (contenders) are wearing 2.5x to 4x scopes.
Just my thoughts, your mileage may vary!!!