Never overlook the value of a good scare.

Back when I was in high school, my fellow students and I were required to watch a half-hour film consisting mostly of footage from the aftermath of highway accidents. There was blood and gore aplenty, all designed to strike fear into the hearts of soon-to-be motorists. Whether or not it worked on everyone's psyche is debatable, but the experience was certainly unforgettable.Pondering the "worst-case scenario" does provide food for thought, even when the backdrop is recession rather than traffic safety.

While many experts believe that we'll escape with a relatively mild recession that ends by midyear, that declining interest rates will be helpful, and that there is hope for the stock market, one should consider the other side of the coin as well. A "safety-first" attitude, even if confined to a portion of your investment portfolio rather than all of it, is no joke during recession. Your personal confidence level, not the words of experts, should be the deciding factor.

"Face it, we're in a recession, and we've never gone into a recession with our institutions in weaker shape," said William Donoghue, publisher of Donoghue's Moneyletter, based in Holliston, Mass. "The fact that a company you put your money in has a big building doesn't mean that the people in it are smart, but it does mean that you've helped pay for the building."

He's convinced that the federal government has not been bailing out the savings and loan industry "in a timely fashion"; that the number of problem banks is likely much higher than publicly acknowledged; and that insolvent insurance companies could well be a nasty byproduct of recession.

"If the Saddam Hussein situation turns out really negative, or if the Federal Deposit Insurance Corp. has to nationalize two or three banks, the 1991 economy will be more difficult than now anticipated," warned Don-oghue, the "guru" of money-market funds since the 1970s. "This is a time to build a portfolio that excludes credit risk, an extremely conservative portfolio."

There has already been a "flight to quality" in money market funds, with those investing primarily in U.S. Treasuries growing dramatically in assets.

For investors who seek good yield with no credit risk, Donoghue recommends Fidelity Spartan U.S. Treasury Money Market Fund or Dreyfus 100 Percent U.S. Treasury Money Market Fund. If you wish to expand your risk to include agencies backed by the full faith of the U.S. government, Donoghue likes Ben-ham's Government Agency Fund. In addition, he favors the various Ben-ham Target Maturities funds that invest in zero-coupon bonds, duration based on your hopes for interest rates.

Because he believes the U.S. dollar will continue to weaken, he recommends two no-load (no initial sales charge) currency-oriented funds, Scudder International Bond Fund and T. Rowe Price International Bond Fund. If you want certificates of deposit, he believes you should buy them from Merrill Lynch & Co. rather than your local bank, in order to get a better rate.

"If you have a company 401 retirement plan, you should really fund it as much as you can," said Donoghue. "Many people leaving a company don't even bother to roll their 401 over into another retirement investment, but simply use the money, and that is overlooking the value of a quality investment vehicle."

Also taking recession fears to heart is Jonathan Pond, author of the new book "Safe Money in Tough Times" (Dell, 1991). His highly personal recommendations to cut expenses during recession include:

Quit playing the lottery. Lotteries are nothing more than a tax on the naive.

Appeal your property tax assessment. Property values have dropped in many areas of the country and will drop in others as the recession continues.

Raise the deductibles on car, homeowner and renter insurance policies, saving hundreds of dollars.

Decide what you're buying before you go shopping, and resist impulse purchases. When you buy something just because it's on sale, you haven't saved money.