After years of booming shares, privatisation windfalls and soaring house prices, the Government's personal finance watchdog has made a rather embarrassing discovery.

That too many of us are rather short of ready cash.

According to the Financial Services Authority (FSA), more than six million families - about a fifth of the population - find it difficult to handle debt.

It could get tougher with stock markets wobbling and house prices vulnerable.

Not to mention the £12.5 billion rise in personal taxation - equivalent to about 4p in the pound - in the pipeline to finance Chancellor Gordon Brown's dreams for public services.

Suddenly, our affluence is threatened. Older folk with low outgoings, some inherited money in the bank and paid mortgages are better positioned for recession.

In the 25 to 45 age group, two golden rules apply: Try to keep debts as low as possible and save steadily.

So put off buying that new car and moving house and take cheap holidays instead of round-the-world career breaks.

Try juggling credit card debts to trim borrowing costs and switch to a basic bank account that doesn't let you overspend.

Saving is a trickier challenge as public spending continues to rise.

According to IFA Promotion, which champions the concept of independent financial advisers, a third of adults have no savings and almost two thirds have less than £1,500.

Fewer than one in eight has more than £20,000.

Savings are vital if economic storms do arrive. They buy time when income falls and can even guard against negative equity.

To save effectively you must put a regular amount aside every week or month. Anyone who started a £50-a-month savings plan 18 years ago with a Fidelity Special Situations unit trust would now have £44,806.

That figure would be £3,000 less for investors who stopped regular monthly saving for six months.

Governments like you to save for the long-term so Gordon Brown created Individual Savings Accounts (Isas) as Labour's answer to the Tories' highly successful PEPs.

Isas allow a maximum investment of up to £7,000 a year, with capital gains and income earned on the money paid tax-free.

This tax break will be less generous when the Government introduces a ten per cent tax on share dividends and income from April 2004.

Isa money is invested in shares - specific firms and managed funds - cash, bonds and gilts, or a mixture of any two.

Those aged between 16 and 18 can invest up to £3,000 a year in a cash mini Isa - handy if an older relative passes on cash outside the taxman's grasp.

You can withdraw money at any time without losing the tax advantages but the provider may impose withdrawal terms.

Given the current state of major stock markets, Isas invested in stocks and shares will surely go down like a lead balloon in this tax year.

But serious investors are loathed to turn their backs on Isas because from April 5 they lose the opportunity to put the returns on their investment beyond the taxman's clutches.

Although the limit is £7,000, many Isa providers welcome savers with a minimum £100 lump sum and monthly direct debit of £25.

Isa money will this year head away from stock markets towards safer boltholes like corporate bonds (issued by companies to raise finance) and gilts (issued by the Government to finance spending plans).

Providing these companies, and indeed the Government, don't go bust, both promise a rate of interest better than the High Street.

Isa investors can use the tax shelter to boost income rather than protect capital gains.

Legal & General's High Income Isa, invested in corporate bonds in big companies in US, Europe and UK, promises tax free income of 7.88 per cent in year one.

However, original capital is not guaranteed.

Colin Jackson, of Baronworth Investments, suggests UK Gilt Fund, devised with Dresdner RCM Services, as another low-risk way of using the full £7,000 allowance.

Income, just under five per cent per year, can be added to the original investment . Again, the return of the initial sum is not guaranteed.

Once the Isa is set up, savers should try to keep them in place for as long as possible. If the money is withdrawn, the tax shelter is lost and the taxman gets his fingers back into your savings pot.