Avoiding the storm clouds looming over the economic horizon

If you haven't already heard, the weatherman of the global economy, the International Monetary Fund (the IMF), has forecast a gloomier outlook for developed economies. US growth has been substantially revised down, eurozone growth trimmed and the global economy as a whole has weaker prospects. It seems that even the astounding expansion of emerging economies will not be enough to turn the tide. If this wasn't bad enough, the danger of a Greek default, eurozone contagion and a new global banking liquidity crisis is a very real threat to the tepid recovery that has taken hold.

So, the question is: are you prepared for a repeat of the great recession? It may be seem fanciful and something to be dismissed as conjecture, but as the age-old saying goes: 'It's better to be safe than sorry.' In the eventuality that you are forced to take on fewer hours, a pay cut or, heaven forbid, redundancy, being able to draw on savings will be a god send. So, here's our guide to the best savings instruments on the market: individual savings accounts (ISAs).

The great feature of ISAs is choice; you can choose from a higher-risk, greater-returns investment ISA or a standard, no-fuss cash variant.

The cash account is much like your bog-standard current account. Your money is guaranteed (up to a reasonable amount) should a bank go into administration; not a bad feature at all if bank liquidity dries up. In contrast to a current account, though, you can on the whole get more attractive interest rates, but the caveat is that you are only permitted to invest up to £5,340 each tax year before tax is levied on the interest accrued. There are two varieties you should be aware of: instant access and fixed term. With the former, you are afforded great flexibility; you can withdraw your cash at any time without incurring charges. With the latter however, you are locked into an agreed period in which you are unable to access your savings without incurring a penalty charge. On the plus side, though, a bank will offer more attractive interest rates to entice you to invest.

Conversely, investment ISAs, although a risky alternative where your money can lose value on your savings rates, will generally offer greater returns. This is because your savings are used to purchase financial instruments on the stock market and thus your balance reflects its overall performance. So, in recognition of you assuming greater risk, you have to be 18 years or older to open such an account and are able to invest a larger tax-free sum than cash accounts, a maximum of £10,680. The great feature for the Warren Buffetts in the making is that you don't have to leave investment decisions with a manager or collective fund; you can choose how to invest yourself.

So, there you have it - a sure-fire way to save and prepare for any eventuality. Hey, the worst may be never happen, so when the economy does begin to take off again you can use your savings to jet off to the Far East and rent a luxury villa; enjoying a well-deserved rest with a margarita in hand.